Reference no: EM133072180
Choose correct answer-
1. The constant perpetual growth model is applicable primarily to those firms which-
a. have relatively stable earnings and expect to increase the annual dividend for several years
b. have growth rates that are less than 0.5%
c. Have a long history of constant dividends
d- have commenced paying dividend and expect to increase significantly in the short term
e. Are relatively new and fast growing
2.Which of the following will increase the sustainable rate of growth for a firm?
a. increase in the dividend payout ratio
b. decrease in earning per share
c. increase in total equity of the firm
d. decrease in net income
e. increase in the retention ratio
3. Which one of the following will Which one of the following will increase the price-earnings ratio, all else constant?all else constant?
(I.) a decrease in the number of shares outstanding
(II.) an increase in net income
(III.) a decrease in the earnings yield
(IV.) decrease in the market price per share
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a
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I only
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b.
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III only
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c.
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II and IV only
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d.
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I and III only
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e.
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I, III, and IV only
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4. What is the beta of a portfolio which consists of the following
Security : A : Amount invested: $7000 Beta: 1.14
Security : B : Amount invested: $3000 Beta: 0.62
Security : C : Amount invested: $5000 Beta: 1.37
Security : D : Amount invested: $9000 Beta: 0.88
a. 1.07
b. 0.99
c. 1.14
d. 1.03
e. 1.17
5. The following portfolio has an expected return of_____________ percent and a beta of ____________
Security: X Amount Invested : $12000 Expected Return: 16.7% Beta: 1.42
Security: Y Amount Invested : $18000 Expected Return: 7.8% Beta: 0.88
Security: Z Amount Invested : $10000 Expected Return: 9.4% Beta: 1.02
a. 10.87 , 1.11
b. 11.03, 1.10
c. 10.87, 1.08
d. 11.03, 1.07
e. 11.11 , 1.09
6. The market has a standard deviation of 13.6 percent while a risky has a standard deviation of 22.4 percent. The covariance of the stock with the market is .0120. What is the beta of the stock?
a .48
b .65
C. .79
d. .91
e. 1.06
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