Reference no: EM132555887

Question 1: A company's common share has a price of $300, and the company will pay a dividend (D1) of dividend of $9. If the dividend is expected to grow at a constant rate, calculate the growth if the required rate of return is 15%.

a) 10%

b) 12%

c) 15%

d) 66%

e) None of the above

Question 2: LSP Co.'s stock price is $58.88, and it recently paid a $2.00 dividend. This dividend is expected to grow by 25% for the next 3 years, then grow forever at a constant rate, g; and rs = 12%. At what constant rate is the stock expected to grow after Year 3? *

a) 9.5%

b) 6.25%

c) 15.75%

d) 33.33%

e) None of the above

Question 3: You are considering an investment in Tata's stock, which is expected to pay a dividend of $2.00 a share at the end of the year (D1 = $2.00) and has a beta of 0.9. The risk-free rate is 5.6%, and the market risk premium is 6%. Tata currently sells for $25.00 a share, and its dividend is expected to grow at some constant rate g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years?

a) $32.32

b) $78.00

c) $27.32

d) $0

e) None of the above

Question 4: How much would you be willing to pay for an investment that would return $800 each year at the end of each of the next 6 years? Assume an annual interest rate of 5%.

a. $5,441.53

b. $4,800

c. $3,369.89

d. $4,060.55

e. None of the above

Question 5: Sephora Corp.'s bonds currently sell for $1,150. They have a 6.75% annual coupon rate and a 15-year maturity, but they can be called in 6 years at $1,067.50. Assume that no costs other than the call premium would be incurred to call and refund the bonds, with rates expected to remain at current levels on into the future. Under these conditions, what rate of return should an investor expect to earn if he or she purchases these bonds, the YTC or the YTM? *

a) 3.92%

b) 4.12%

c) 4.57%

d) 4.81%

e) None of the above

Question 6: The common stock of Bruner Aeronautics sells for $80 a share. The stock expects to pay $2 per share next month when the annual dividend is distributed. The company has a established a pattern of increasing their dividends by 2% annually. What is the market rate of return on this stock?

a) 4.5%

b) 2.5%

c) 2%

d) 4%

e) None of the above

Question 7: Alpha stock has an expected return of 12.25 percent. The beta of the stock is 1.15 and the risk-free rate is 5 percent. What is the market risk premium?

a) 1.30%

b) 6.30%

c) 15.00%

d) 6.50%

e) None of the above