Question 1: The return distribution for the asset XYZ is as shown below:
Return Probability
- 0.1 0.10
+ 0.1 0.40
+0.20 0.30
+0.30 0.20
What is the standard deviation for the XYZ returns?
A. 0.0125
B. 0.1118
C. 0.0625
D. 0.0791
Question 2: The beta of Microsoft's stock is 1.2, whereas the risk-free rate of return is 4 percent. Assume that the expected return on the market is 16 percent. Then, what is the expected return on Microsoft stock?
A. 8.80%
B. 28.00%
C. 18.40%
D. 23.20%
Question 3: If you have a 3 year loan that requires $1,000 payments each year at 7% annual interest rate what would be the present value of the loan?
A. $2,624.32
B. $3,000.00
C. $3,210.00
D. $2,803.74
Question 4: Robert has a mortgage on his home of $400,000 and has a fixed rate mortgage of 6.125% for 30 years. What would his monthly payments be for this loan?
A. $2,041.67
B. $2,596.55
C. $2,430.45
D. $2,788.46
Question 5: What is the effective annual interest rate?
A. The simplest interest rate charged.
B. Rate that reflects compounding.
C. Rate with bank fees included.
D. Interest rate quoted by banks.