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1. Which one of the following risks is irrelevant to a well-diversified investor?
unsystematic risk
nondiversifiable risk
systematic risk
market risk
2. The risk-free rate of return is 3.9 percent and the market risk premium is 6.2 percent. What is the expected rate of return on a stock with a beta of 1.21?
10.92%
12.22%
11.40%
12.79%
On the income statement, net profit after tax is defined as: operating profit minus operating expenses operating profit minus cost of goods sold operating profit minus interest operating profit minus total expenses none of the above
Your firm is considering a new investment proposal and would like to calculate the weighted average cost of capital. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 12.1% that is paid semi annually. The bond ..
While vacationing in Florida, John Kelley saw the vacation home of his dreams. It was listed with a sale price of $200,000. The only catch is that John is 40 years old and plans to continue working until he is 65. Still, he believes that prices gener..
You are planning to invest in a project for the production of widgets. The cost of the project is $10M and the project generates a single cash flow one year after the investment. Demand for widgets can be either high or low with equal probability.
How much will be due at the end of 10 years?- What will be the yield to the lender if it is repaid after 8 years?- If 1 point is charged in (b) what will be the yield to the lender?
Assuming that the company’s overall beta is 1.2102. The risk-free rate is 5%, and the required rate of return on the market is 11%. You are considering a low-risk project whose market beta is 0.5 less than the company’s overall beta.
You have just arranged for a $1,660,000 mortgage to finance the purchase of a large tract of land. The mortgage has an APR of 6.6 percent, and it calls for monthly payments over the next 20 years. However, the loan has an eight-year balloon payment, ..
Stephani German, a 40-year-old woman, plans to retire at age 65, she wants to accumulate $500,000 over the next 25 years to supplement the retirement programs that are being funded by the federal government and her employer. She expects to earn an av..
What are the dividend payment process and the open-market repurchase process? In your answer, be sure to explain the effects they have in a perfect world.
A firm is considering investment in a capital project which is described below. The firm's cost of capital is 18 percent and the risk-free rate is 6 percent. The project has a risk index of 1.5. The firm uses the following equation to determine the r..
Suppose a PM who is managing against the Russell 1000 as a benchmark invests the fund so that the percentage of its assets invested in each sector matches each sector’s percentage weight in the index. How does that PM expect to add value through acti..
When we talk about investing, the first thing that comes to mind for most people are stocks and bonds. However, there are many investing vehicles available. If you were told, you could only select one investment vehicle, what would it be and why?
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