Data for Atwill Corporation is shown below.Now Atwill acquires some risky assets that cause its beta to increase by 30%.In addition,expected inflation increases by 2.00%.What is the stock's new required rate of return? \[\begin{array} { l r } \text { Initial beta } & 1.00 \\ \text { Initial required return } \left( \mathrm { r } _ { \mathrm { s } } \right) & 10.20 \% \\ \text { Market risk premium, RPM } & 6.00 \% \\ \text { Percentage increase in beta } & 30.00 \% \\ \text { Increase in inflation premium, IP } & 2.00 \% \end{array}\]

A) 14.00% B) 14.70% C) 15.44% D) 16.21% E) 17.02% A) 14.00% B) 14.70% C) 15.44% D) 16.21% E) 17.02%

If D0 = $2.25,g (which is constant)= 3.5%,and P0 = $50,what is the stock's expected dividend yield for the coming year?

A) 4.42% B) 4.66% C) 4.89% D) 5.13% E) 5.39% A) 4.42% B) 4.66% C) 4.89% D) 5.13% E) 5.39%

Exam 29: Basic Financial Tools: a Review

A bond that had a 20-year original maturity with 1 year left to maturity has more interest rate price risk than a 10-year original maturity bond with 1 year left to maturity.(Assume that the bonds have equal default risk and equal coupon rates,and they cannot be called.)

(True/False)

4.9/5

(73)

Question 221

Diversification will normally reduce the riskiness of a portfolio of stocks.

(True/False)

4.9/5

(86)

Question 222

What's the present value of $1,525 discounted back 5 years if the appropriate interest rate is 6%,compounded monthly?

(Multiple Choice)

4.9/5

(77)

Question 223

Data for Atwill Corporation is shown below.Now Atwill acquires some risky assets that cause its beta to increase by 30%.In addition,expected inflation increases by 2.00%.What is the stock's new required rate of return? Initial beta 1.00 Initial required return 10.20\% Market risk premium, RPM 6.00\% Percentage increase in beta 30.00\% Increase in inflation premium, IP 2.00\%

(Multiple Choice)

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Question 224

Which of the following bank accounts has the highest effective annual return?

(Multiple Choice)

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Question 225

Hirshfeld Corporation's stock has a required rate of return of 10.25%,and it sells for $57.50 per share.The dividend is expected to grow at a constant rate of 6.00% per year.What is the expected year-end dividend,D₁?

(Multiple Choice)

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Question 226

One year ago Lerner and Luckmann Co.issued 15-year,noncallable,7.5% annual coupon bonds at their par value of $1,000.Today,the market interest rate on these bonds is 5.5%.What is the current price of the bonds,given that they now have 14 years to maturity?

(Multiple Choice)

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Question 227

What's the present value of a perpetuity that pays $250 per year if the appropriate interest rate is 5%?

(Multiple Choice)

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Question 228

If D₀ = $2.25,g (which is constant)= 3.5%,and P₀ = $50,what is the stock's expected dividend yield for the coming year?

(Multiple Choice)

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Question 229

Managers should under no conditions take actions that increase their firm's risk relative to the market,regardless of how much those actions would increase the firm's expected rate of return.

(True/False)

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Question 230

Stocks A and B have the following data.Assuming the stock market is efficient and the stocks are in equilibrium,which of the following statements is CORRECT? A B Price \ 25 \ 40 Expected growth 7\% 9\% Expected return 10\% 12\%

(Multiple Choice)

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Question 231

Which is the best measure of risk for a single asset held in isolation,and which is the best measure for an asset held in a diversified portfolio?

(Multiple Choice)

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Question 232

If a stock's dividend is expected to grow at a constant rate of 5% a year,which of the following statements is CORRECT? The stock is in equilibrium.

(Multiple Choice)

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Question 233

Which of the following statements regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 8% is CORRECT?

(Multiple Choice)

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Question 234

The store where you bought new home furnishings offers you two alternative payment plans.The first plan requires a $4,000 immediate up-front payment.The second plan requires you to make monthly payments of $137.41,payable at the end of each month for 3 years.What nominal annual interest rate is built into the monthly payment plan?

(Multiple Choice)

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Question 235

If you plotted the returns of a company against those of the market and found that the slope of your line was negative,the CAPM would indicate that the required rate of return on the stock should be less than the risk-free rate for a well-diversified investor,assuming that the observed relationship is expected to continue in the future.

(True/False)

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Question 236

Hazel Morrison,a mutual fund manager,has a $40 million portfolio with a beta of 1.00.The risk-free rate is 4.25%,and the market risk premium is 6.00%.Hazel expects to receive an additional $60 million,which she plans to invest in additional stocks.After investing the additional funds,she wants the fund's required and expected return to be 13.00%.What must the average beta of the new stocks be to achieve the target required rate of return?

(Multiple Choice)

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Question 237

Joel Foster is the portfolio manager of the SF Fund,a $3 million hedge fund that contains the following stocks.The required rate of return on the market is 11.00% and the risk-free rate is 5.00%.What rate of return should investors expect (and require)on this fund? Stock Amount Beta A \ 1,075,000 1.20 B 675,000 0.50 C 750,000 1.40 D 500,000 0.75

(Multiple Choice)

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Question 238

Assume that the risk-free rate is 6% and the market risk premium is 5%.Given this information,which of the following statements is CORRECT?

(Multiple Choice)

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Question 239

American Express and other credit card issuers must by law print the Annual Percentage Rate (APR)on their monthly statements.If the APR is stated to be 18.00%,with interest paid monthly,what is the card's EFF%?

(Multiple Choice)

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Question 240

Showing 221 - 240 of 247

Exam 29: Basic Financial Tools: a Review

A bond that had a 20-year original maturity with 1 year left to maturity has more interest rate price risk than a 10-year original maturity bond with 1 year left to maturity.(Assume that the bonds have equal default risk and equal coupon rates,and they cannot be called.)

Diversification will normally reduce the riskiness of a portfolio of stocks.

What's the present value of $1,525 discounted back 5 years if the appropriate interest rate is 6%,compounded monthly?

Which of the following bank accounts has the highest effective annual return?

Hirshfeld Corporation's stock has a required rate of return of 10.25%,and it sells for $57.50 per share.The dividend is expected to grow at a constant rate of 6.00% per year.What is the expected year-end dividend,D1?

One year ago Lerner and Luckmann Co.issued 15-year,noncallable,7.5% annual coupon bonds at their par value of $1,000.Today,the market interest rate on these bonds is 5.5%.What is the current price of the bonds,given that they now have 14 years to maturity?

What's the present value of a perpetuity that pays $250 per year if the appropriate interest rate is 5%?

If D0 = $2.25,g (which is constant)= 3.5%,and P0 = $50,what is the stock's expected dividend yield for the coming year?

Managers should under no conditions take actions that increase their firm's risk relative to the market,regardless of how much those actions would increase the firm's expected rate of return.

Stocks A and B have the following data.Assuming the stock market is efficient and the stocks are in equilibrium,which of the following statements is CORRECT? A B Price \ 25 \ 40 Expected growth 7\% 9\% Expected return 10\% 12\%

Which is the best measure of risk for a single asset held in isolation,and which is the best measure for an asset held in a diversified portfolio?

If a stock's dividend is expected to grow at a constant rate of 5% a year,which of the following statements is CORRECT? The stock is in equilibrium.

Which of the following statements regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 8% is CORRECT?

Assume that the risk-free rate is 6% and the market risk premium is 5%.Given this information,which of the following statements is CORRECT?

American Express and other credit card issuers must by law print the Annual Percentage Rate (APR)on their monthly statements.If the APR is stated to be 18.00%,with interest paid monthly,what is the card's EFF%?

An Overview of Financial Management and the Financial Environment

Risk and Return: Part I

Risk and Return: Part Ii

Bond Valuation

Financial Options

Accounting for Financial Management

Analysis of Financial Statements

Basic Stock Valuation

Corporate Valuation and Financial Planning

Corporate Governance

Determining the Cost of Capital

Capital Budgeting: Decision Rules

Cash Flow Estimation and Risk Analysis

Real Options

Distributions to Shareholders: Dividends and Repurchases

Capital Structure Decisions

Dynamic Capital Structures and Corporate Valuation

Initial Public Offerings, investment Banking, and Financial Restructuring

Lease Financing

Hybrid Financing: Preferred Stock, Warrants, and Convertibles

Supply Chains and Working Capital Management

Providing and Obtaining Credit

Advanced Issues in Cash Management and Inventory Control

Enterprise Risk Management

Bankruptcy, reorganization, and Liquidation

Mergers and Corporate Control

Multinational Financial Management

Time Value of Money

Pension Plan Management

Financial Management in Not-For-Profit Businesses

a Values of the Areas Under the Standard Normal

Filters

Hirshfeld Corporation's stock has a required rate of return of 10.25%,and it sells for $57.50 per share.The dividend is expected to grow at a constant rate of 6.00% per year.What is the expected year-end dividend,D₁?

If D₀ = $2.25,g (which is constant)= 3.5%,and P₀ = $50,what is the stock's expected dividend yield for the coming year?