1-A company has paid $2 per share in dividends for the past several years and plans to continue to do so indefinitely. If an investor's required return is 13%, what is the most she should pay for a share of this firm's stock?
A: $15.38
B: $20.00
C: $22.60
D: $26.13
E: $65.00
2 -An investor deposited $10,000 into a portfolio at the beginning of the year. The portfolio increased by 8% by the end of the year. The investor withdrew half his funds and left the remaining on deposit. These funds increased by 20% over the next year. The investor then closed his account. What is the investor's two year holding period return?
A: 8.0%
B: 14.0%
C: 16.6%
D: 18.8%
E: 20.0%
3- A $1,000 par value bond with a 5% coupon that pays interest semiannually and matures in 2 ½ years and has a current price of $977. What is the annualized yield to maturity?
A:3.0%
B:4.0%
C:5.0%
D:6.0%
E: 7.0%
4- A portfolio earned 10% the first year, -13% the second year, 15% the third year, and 16% the fourth year. What is the annual geometric average of this investment ?
A: 6.0%
B: 6.3%
C: 6.6%
D: 7.0%
E: 7.3%
5-A company just paid its annual dividends of $1.30 per year. The company has developed a new technique to manufacture its product that is anticipated to provide abnormal dividend growth of 12% per year for the next two years. By then, the competition is anticipated to have also acquired the technique, and the company dividend growth is expected to return to the industry average of 7% per year. If an investor's required return for this firm is 13%, what is the value of this stock?
A:$11.20
B:$18.57
C:$23.57
D:$24.27
E:$27.46
6-Ann is considering the purchase of a $1,000 bond with coupon of 6% that pays interest semiannually and matures in 3 years. Ann believes she will be able to reinvest her funds at a 4% annual rate. If Ann buys this bond for $1,010,what is her annualized realized yield?
A: 4.0%
B:4.6%
C:5.6%
D:5.8%
E:6.2%
7- Given returns of 15%, 8%, 12%, and 5%, what is the difference between the arithmetic average and geometric average?
A: 0.00%
B: 0.07%
C: 0.39%
D: 1.30%
E: 1.53%
8 -A three-year project costs $50,000 and returns $20,000 the first year, $30,000 the second year, and $25,000 the third year. If the required return is 10.0%, what is the Net Present Value (NPV)?
A: $11,758
B: $12,547
C: $25,000
D: $61,758
E: $62,547
9-A portfolio has a standard deviation of 22%. If the risk free rate is 3.5%, the expected return on the market portfolio is 12%, and the standard deviation of the market portfolio is 25%. What is the required return on the market portfolio?
A: 7.48%
B: 10.98%
C: 12.00%
D: 13.16%
E: 14.06%
10- The risk-free rate is 4.3% and the required return on the market portfolio is 13.3%. If the beta of a security is 1.1, what is the required return on the security?
A: 9.9%
B: 13.3%
C: 14.2%
D: 14.6%
E: 18.9%
11-The risk-free rate is 3.6% and the required return on the market portfolio
is 11.8%. A company that has just paid $1.80 per share in annual dividends has a beta of 0.9 and long-term growth rate of 5.2%. What is the dollar value of this stock?
A: $17.25
B: $20.99
C: $24.56
D: $31.14
E: $32.76
12-The risk-free rate is currently 3.5%. Use the following information to determine the required return for XYZ, Inc. Risk Factor Coefficient Price of Risk Factor Confidence risk 1.20 2.0% Time horizon risk 0.40
-0.7% Inflation risk 0.803.0% Business cycle risk 0.90 1.2% Market -timing risk 0.60 1.0%
A: 6.2%
B: 9.7%
C:10.3%
D: 11.8%
E: 13.9%
13- Rob pays 28% in combined local, state, and federal taxes. If a corporate bond yields 8.3%, what is the after-tax yield?
A: 2.3%
B: 6.0%
C: 8.3%
D: 10.7%
E: 11.5%
14-The risk-free rate is currently 2.8%. In one year the price of a given share of stock that currently trades at $40 per share is expected to either increase by 8% or decrease by 2%. What is the current value of a call on this stock with exercise price of $40?
A: $0.00
B: $1.09
C: $1.24
D: $1.49
E: $1.62
15-A $1,000 par value bond with a coupon of 6% and maturity of 10 years that pays interest semiannually is currently selling for $929. What is the current yield on this bond?
A: 6.0%
B: 6.5%
C: 7.0%
D: 7.5%
E: 8.0%
16-A four-year project costs $125,000 and returns $42,025 at the end of each of the next four years. What is the Internal Rate of Return (IRR) for this project?
A: 11.5%
B: 12.0%
C: 12.5%
D: 13.0%
E: 13.5%
17-What is the safe-rate-reinvestment-rate IRR for this project?
A: 10.6%
B: 11.1%
C: 11.6%
D: 12.1%
E:12.6%
18- What is the borrowing-rate-reinvestment-rate IRR for this project?
A: 10.6%
B: 11.1%
C: 11.6%
D: 12.1%
E: 12.6%
19-What is the adjusted -rate IRR for this project?
A: 10.6%
B: 11.1%
C: 11.6%
D: 12.1%
E: 12.6%
20- The risk-free rate is currently 3.5%. Use the following information to determine the required return for XYZ, Inc. Risk Factor Coefficient Price of Risk Factor Confidence risk 1.20 2.0% , Time horizon risk0.40-0.7%, Inflation risk 0.80 3.0%, Business cycle risk 0.90 1.2% Market -timing risk, 0.60 1.0%.
A: 6.2%
B: 9.7%
C: 10.3%
D: 11.8%
E: 13.9%
21-The risk-free rate is currently 3.5%, and one share of stock of a given firm is selling for $50. In one year, the price of the stock is expected to be either $47.50 or $53.75. What is the weighting factor to compute the value of a call on this stock with an exercise price of $50 using the Binomial Model?
A: Negative
B: 0.34
C: 0.44
D: 0.68
E: 0.88
22- A company is expected to pay $1.75 in annual dividends next year. If the anticipated annual growth rate is 4% and the current price of the stock is $25 per share, what is the expected return on this stock?
A: 4.0%
B: 7.0%
C: 7.3%
D: 11.0%
E: 11.3%
23- Susan has 40% of her portfolio invested in a mutual fund to track the S&P 500 and 40% in a mutual fund to track the Dow Jones Industrial Average (DJIA) and 20% in government securities. To evaluatethe performance of her portfolio, what is Susan's best benchmark?
A:the DJIA Index
B:the S&P 500 Index
C:agovernment security index
D:a50%/50% combination of A and B
E:acombination of A, B, and C
24- A company currently has $3.50 earnings per share of which $1.05 is paid in annual dividends per share. If the growth rate for the firm is 4% per year and the required return is 9%, what is the theoretical P/E ratio?
A: 5.71
B: 6.00
C: 6.24
D: 6.66
E: 7.00
25- The financial planning process include all of the followingEXCEPT
A: assessing the current status of the financial markets
B:analyzing the client's financial status
C:monitoring the portfolio
D:developing a policy statement
E: establishing a client-advisor relationship
26- The efficient frontier
A: contains portfolios with the highest risk for a given return
B: contains portfolios with the lowest return for a given risk
C: contains portfolios with the highest return for a given ris
D:A and B are correct, but C is not
E: A and C are correct, but B is not
27-Regular, periodic investments in a security without regard to price is
A: income averaging
B: dollar cost averaging
C: dividend reinvesting
D: fundamental investing
E: time investing
28- Hedging strategies are
A: designed to limit investment losses
.B: a form of investment insurance
C: transfers risk from one entity to another
D: all of these statements are true
E: statements A and C are true, but B is not
29-Investors should consider using financial leverage when they
A: feel confident that the investment itself can generate
sufficient cash flow to cover debt service.
B: expect high inflation.
C: do not have the available cash to finance the purchase ofa particular asset.
D: can borrow money at a rate lower than the expected return on an investment.
E: all of these choices are true.
30-In the accumulation phase of the investor life cycle
A: investors with long-term time horizons should accept only low risk
B: investors have high net worth.
C: investors are saving for retirement only.
D: investors may seek to accumulate wealth through higher - risk investments.
E: none of these choices apply.