1. A systemic risk is one that: (a) Can be eliminated through diversification (b) Can be the cause of the collapse of an entire system (c) Can be insured privately (d) Can be easily contained so that it does not spread
2. A company intends to pay dividends of $0.40, $0.60, $0.75, and $1.00 per share for the coming four years, respectively. After that, the expectation is that the dividend will increase at a rate of 3.5% annually. If the appropriate discount rate is 13.5%, what is the present value of the stock?
3. Fitzgerald’s 20-year bonds pay 9 percent interest annually on a $1,000 par value. If bonds sell at $945, what is bond’s yield to maturity? What would be the yield to maturity if the bonds paid interest semiannually? Explain the difference.