If an investor purchases a share of stock for 300 collects

Reference no: EM13617531

1. Suppose a zero coupon bond is selling for $614 today. It promises to pay $1,000 in exactly 10 years with annual compounding. What is the firm's after-tax cost of debt if this is its sole debt outstanding (assuming the firm is in the 20% tax bracket)?

A. 4%

B. 5%

C. 6%

D. 7%

2. Which of the following best describes a pure-play?

A. a private firm that is held in isolation in a one-company investment portfolio.

B. a publicly traded firm that is similar to the company or project being analzed.

C. both a and b are correct

D. both a and b are incorrect

3. Weights used in calculating the WACC should

A. sum to 1.00

B. always include Wd

C. be based on the book value of each source of financing.

D. be calculated according to the price of each security-so if the price of a bond is $1,000, and the price of common stock is $50, then the weight of debt would be .20.

4.Total risk is measured by

A. the standard deviation of retruns

B. the firm's beta

C. Moody's, Standard & Poor is, and Fitch ratings

D. the variability of EBIT

5. If an investor purchases a share of stock for $300, collects a dividend during the year equal to $35 a share, and sells the stock at the end of the year for $289, what is the investor's return for the year?

A. 12.11%

B. 8.30%

C. 8.00%

D. 15.33%

6. Chapter 9 discusses three different types of returns. Identify the item in the list below that is NOT one of those three types of returns.

A. the actual rate of return

B. the expected rate of return

C. the risk-free rate of return

D. the required rate of return

Reference no: EM13617531

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