. You are bullish on Google stock. The current price is $1,075/share and you have $10,0010 of your own to invest. You then borrow an additional $10,000 from your broker at an interest rate of 5% per year and invest a total of $20,000 in the stock. If Google does not pay a dividend, which of the following is TRUE?

A.) If Google stock declines by 20% over the next year, the total return on your investment is -45%.

B.) All statements are true.

C.) Margin enables investors to achieve higher returns, however, there is greater downside risk due to the leverage and interest cost.

D.) If Google stock goes up by 20% over the next year, the total return on your investment is 35%.

E.) If Google stock remains unchanged over the year, your return on investment would be -5%.

2. You are to receive a cash flow of $1,750 three years from now. Once received, you will invest the money and earn a 5.5% return. What is the value of the investment in year 5?

A.)$2,345

B.)$1,929

C.)$1,948

D.) $2,287

E.) $2,055

3. The yield on a 10-year US Treasury bond is 2.5%. ABC Co. and XYZ Co. each issue a 10-year bond. ABCs bond has a yield of 3.5%; while XYZs bond has a yield of 5%. Select the statement below that BEST describes this situation.

A.) The credit spread of ABC's bond is 1%; and XYZ Co. should have greater default risk than ABC Co.

B.) XYZ Co. should have greater maturity risk than ABC Co.

C.)The credit spread of ABCs bond is 3.5%. XYZ Co. should have a higher credit rating than ABC Co.

D.) The credit spread of XYZs bond is 5%.