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1. The expected rates of return for Stocks A, B, and C are .04, .10, and .12 respectively. The risk free rate is .03 and the market risk premium is .08. If you invest $3,000, $6,000, and $3,000 in Stocks A, B, and C respectively, what is the beta of the portfolio? Assume that the three stocks are priced in equilibrium.
a. .80
b. .75
c. .70
d. 1.0
2. CVC Inc.'s bonds mature in 7 years, have a par value of $1,000, and a coupon rate of 8% paid semi-annually. The market interest rate for the bonds is 9%. What is the expected price of the bond?
a. $969.96
b. $1,084.81
c. $944.30
d. $994.21
e. $948.89
If a firm's sales are $1,500,000 and it costs 9 percent to carry current assets, what is the potential savings if management can increase inventory turnover from 3 to 4 times a year and increase receivables turnover from 4.5 to 6 times a year?
The Security Market Line (SML) relates risk to return, for a given set of financial market conditions. If investors conclude that the inflation rate is going to increase, which of the following changes would be most likely to occur?
Identify a factor that does not affect cash inflows
Current annualized yields on 1 year US treasury securities are only .28%....while current annualized yields on 2year US treasury securities are .69% (note you may assume that both 1 and 2year securities in this example are “0” coupon securities with ..
What is the value of a put option (to the nearest dollar) written on the stock with the same exercise price and expiration date as the call option?
Diversifying Away Country Risk. Why do you think that an MNC’s strategy of diversifying projects internationally could achieve low exposure to overall country risk?
How does management greed influence budget decisions?
A company has an EPS of $3.45, a book value per share of $37.26, and a market/book ratio of 1.8x. What is its P/E ratio?
Which of the following methods results in a net present value of zero ? If a bound is issued at a premium the coupon rate is.
If the company has $5 million per day in collections and $3 million per day in disbursements, how many dollars will the cash management system free up? Justify your answers.
Moraine, Inc., has an issue of preferred stock outstanding that pays a $6.55 dividend every year in perpetuity. If this issue currently sells for $91 per share, what is the required return?
What was the arithmetic average annual return on large-company stocks in nominal terms?
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