Question 4 Which of the following formulas determines the expected rate of return of Security A based on the CAPM? A B 1 2 8L9 SAW N 3 4 5 Beta 6 Expected Return 7 The Security Market Line Risk-free A 6 O=B6+D5*(D6-B6) O=B6-C5 (D6+B6) O=B6+C5 (D6-B6) O=B6+D5 D6-B6 2.00% 1.28 ? D Market 1.00 9.00% Question 5 Which formula in B8 leads to a financial decision based on IRR? A B C Year 1234 3 4 5 6 7 8 9 012 2 3 4 Rate Decision Cash Flow (7,500) 1,000 2,000 3,000 4,000 12% ? O IF(NPV(B2:B6)>B7,"Accept","Reject") OIF(IRR(B2:B6)>B7,"Accept","Reject") O IF(IRR(B2:B6)>0,"Accept","Reject") O=IF(NPV(B2:B6)>0,"Accept","Reject") A preferred stock is expected to pay a $1.5 dividend every year. If the required rate of return is 10%, what formula in F4 can be used to determine the value of this stock? A 8 6769SAWN1 2 3 4 5 10 -F2 F3 O-F7/F2 O-F7/F3 O=F2/F3 C D E Preferred Stock Last Dividend Required Return Intrinsic Value Common Stock Last Dividend F 1.5 10% ? 2.5 G