1.Positive Tronics Industries preferred stock has a par value of $100 and pays a dividend of $6.00 per share. It presently sells for $87 per share. What do investors require as a rate of return on this stock? Round off to the nearest.
a.14.5%
b.9.3%
c.6.9%
d.6.0%
2.Stanley Corp. common stock has a required return of 17.5% and a beta of 1.75. If the expected risk free return is 3%, what is the expected return for the market based on the CAPM?
a.11.29%
b.14.29%
c.13.35%
d.15.27%
3.What is the present value of $15,500 to be received 12 years from today? Assume a discount rate of 7.5% compounded annually and round to the nearest $1.
a. $5,790
b. $6,508
c.$7,210
d. $9,010
4.Investment A has an expected return of 15% per year, while investment B has an expected return of 12% per year. A rational investor will choose.
a.investment A because of the higher expected return.
b.investment B because a lower return means lower risk.
c. investment A if A and B are of equal risk.
d.investment A only if the standard deviation of returns for A is higher than the standard deviation of returns for B.
5. Preferred stock is similar to a bond in the following way.
a.preferred stock always contains a maturity date.
b.both investments provide a stated income stream.
c.both contain a growth factor similar to common stock.
d,both provide interest payments.
6. What is the value of a bond that has a par value of $1,000, a coupon of $120 (annually), and matures in 10 years? Assume a required rate of return of 7.8%.
a.$1,198.45
b. $1,200.43
c.$1,284.38
d.$1,349.76
7. Bin Restaurant Corp preferred stock has a market price of $14.50. If it has a yearly dividend of $3.50, what is your expected rate of return if you purchase the stock at its market price?
a.41.43%
b.19.45%
c.22.36%
d.24.14%
8. Department 65 has an issue of preferred stock that pays a dividend of $4.00. The preferred stockholders require a rate of return on this stock of 9%. At what price should the preferred stock sell for? Round off to the nearest $0.10.
a.$36.00
b.$44.40
c.$62.50
d.$88.80
9. The capital asset pricing model
a.provides a risk-return trade off in which risk is measured in terms of the market volatility.
b.provides a risk-return trade off in which risk is measured in terms of beta.
c.measures risk as the coefficient of variation between security and market rates of return.
d.depicts the total risk of a security.
10. Emery Company just paid a dividend yesterday of $2.25 per share. The company's stock is currently selling for $60 per share, and the required rate of return on Emery Company stock is 16%. What is the growth rate expected for Emery Company dividends assuming constant growth?
a.9.47%
b.9.89%
c.10.87%
d.11.81%