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?

Question 1 options:

A) 13.29%

B) 14.14%

C) 16.50%

D) 19.05%

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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?

Question 2 options:

A)

9.98%

B) 10.04%

C) 10.12%

D) 10.37%

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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?

Question 3 options:

A) 6.47%

B) 7.03%

C) 7.68%

D) 8.99%

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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?

Question 4 options:

A) $15

B) $30

C) $45

D) $50

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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?

Question 5 options:

A) -3.40%

B) -2.25%

C) 1.25%

D) 2.60%

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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?

Question 6 options:

A) 6.03%

B) 6.18%

C) 8.47%

D) 8.68%

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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?

Question 7 options:

A) 7.58%

B) 7.91%

C) 8.24%

D) 8.57%

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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?

Question 8 options:

A) -$4.16

B) -$3.96

C) -$3.76

D) -$3.16

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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?

Question 9 options:

A) $3,750

B) $4,333.33

C) $4,706.20

D) $4,943.82

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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?

Question 10 options:

A) 18.74%

B) 20.21%

C) 20.68%

D) 22.60%

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Question 11 (10 points) Question 11 Unsaved

Explain and discuss the three forms of market efficiency.

Question 11 options:

Spell check

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Question 12 (10 points) Question 12 Unsaved

Explain and discuss systematic risk and unsystematic risk.

Question 12 options:

Spell check

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Question 13 (10 points) Question 13 Unsaved

Explain and discuss the idea of standard deviation and its application to risk.

Question 13 options:

Spell check

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Question 14 (10 points) Question 14 Unsaved

Explain and discuss the capital asset pricing model.

Question 14 options:

Spell check

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Question 15 (10 points) Question 15 Unsaved

Explain and discuss the two ways of calculating the cost of equity.

Question 15 options: