Question 1 (5 points) Question 1 Unsaved
The common stock of Air United, Inc., had annual returns of 15.6 percent, 2.4 percent, -11.8 percent, and 32.9 percent over the last four years, respectively. What is the standard deviation of these returns?
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Question 2 (5 points) Question 2 Unsaved
Southern Home Cookin’ just paid its annual dividend of $0.65 a share. The stock has a market price of $13 and a beta of 1.12. The return on the U.S. Treasury bill is 2.5 percent and the market risk premium is 6.8 percent. What is the cost of equity?
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Question 3 (5 points) Question 3 Unsaved
Jerilu Markets has a beta of 1.09. The risk-free rate of return is 2.75 percent and the market rate of return is 9.80 percent. What is the risk premium on this stock?
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Question 4 (5 points) Question 4 Unsaved
Six months ago, you purchased 100 shares of stock in Global Trading at a price of $38.70 a share. The stock pays a quarterly dividend of $0.15 a share. Today, you sold all of your shares for $40.10 per share. What is the total amount of your dividend income on this investment?
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Question 5 (5 points) Question 5 Unsaved
You recently purchased a stock that is expected to earn 22 percent in a booming economy, 9 percent in a normal economy, and lose 33 percent in a recessionary economy. There is a 5 percent probability of a boom and a 75 percent chance of a normal economy. What is your expected rate of return on this stock?
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Question 6 (5 points) Question 6 Unsaved
Sweet Treats common stock is currently priced at $19.06 a share. The company just paid $1.15 per share as its annual dividend. The dividends have been increasing by 2.5 percent annually and are expected to continue doing the same. What is this firm’s cost of equity?
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Question 7 (5 points) Question 7 Unsaved
Chelsea Fashions is expected to pay an annual dividend of $0.80 a share next year. The market price of the stock is $22.40 and the growth rate is 5 percent. What is the firm’s cost of equity?
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Question 8 (5 points) Question 8 Unsaved
One year ago, you purchased a stock at a price of $32.16. The stock pays quarterly dividends of $0.20 per share. Today, the stock is selling for $28.20 per share. What is your capital gain on this investment?
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Question 9 (5 points) Question 9 Unsaved
You have a $12,000 portfolio which is invested in stocks A and B, and a risk-free asset. $5,000 is invested in stock A. Stock A has a beta of 1.76 and stock B has a beta of 0.89. How much needs to be invested in stock B if you want a portfolio beta of 1.10?
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Question 10 (5 points) Question 10 Unsaved
A stock had returns of 11 percent, -18 percent, -21 percent, 5 percent, and 34 percent over the past five years. What is the standard deviation of these returns?
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Question 11 (10 points) Question 11 Unsaved
Explain and discuss the three forms of market efficiency.
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Question 12 (10 points) Question 12 Unsaved
Explain and discuss systematic risk and unsystematic risk.
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Question 13 (10 points) Question 13 Unsaved
Explain and discuss the idea of standard deviation and its application to risk.
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Question 14 (10 points) Question 14 Unsaved
Explain and discuss the capital asset pricing model.
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Question 15 (10 points) Question 15 Unsaved
Explain and discuss the two ways of calculating the cost of equity.
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