Quiz 2 Chapters 5 and 6
20 Fin Questions
1) Suppose a corporation can change its depreciation method so that its tax payments will decrease by $5,000 this year but increase by $5,000 next year.
A) The change will have no impact on the value of the company because its cash flow over time will be the same.
B) The change will decrease the value of the company because investors don’t like changes in accounting methods.
C) The change will decrease the value of the company because lower tax payments this year result from lower reported income.
D) The change will increase the value of the company because the value of the cash savings this year exceeds the cost of the cash payments next year.
2) Assuming two investments have equal lives, a high discount rate tends to favor
A) the investment with even cash flow.
B) the investment with large cash flow late.
C) the investment with large cash flow early.
D) neither investment since they have equal lives.
3) Biff deposited $9,000 in a bank account, and 10 years later he closes out the account, which is worth $18,000. What annual rate of interest has he earned over the 10 years?
4) How much money do I need to place into a bank account that pays a 1.08% rate in order to have $500 at the end of 7 years?
5) Auto Loans R Them loans you $24,000 for four years to buy a car. The loan must be repaid in 48 equal monthly payments. The annual interest rate on the loan is 9 percent. What is the monthly payment?
6) You have contracted to buy a house for $250,000, paying $30,000 down and taking out a fully amortizing loan for the balance, at a 5.7% annual rate for 30 years. What will your monthly payment be if they make equal monthly installments over the next 30 years (to the nearest dollar)?
7) If Cindy deposits $12,000 into a bank account that pays 6% interest compounded semiannually, what will the account balance be in seven years?
8) Stock A has the following returns for various states of the economy:
the Economy Probability Stock A’s Return
Recession 10% -30%
Below Average 20% -2%
Average 40% 10%
Above Average 20% 18%
Boom 10% 40%
Stock A’s expected return is
9) You are considering a sales job that pays you on a commission basis or a salaried position that pays you $50,000 per year. Historical data suggests the following probability distribution for your commission income. Which job has the higher expected income?
A) The salary of $50,000 is greater than the expected commission of $49,630.
B) The salary of $50,000 is greater than the expected commission of $48,400.
C) The salary of $50,000 is less than the expected commission of $50,050.
D) The salary of $50,000 is less than the expected commission of $52,720.
10) Stock W has an expected return of 12% with a standard deviation of 8%. If returns are normally distributed, then approximately two-thirds of the time the return on stock W will be
A) between 12% and 20%.
B) between 8% and 12%.
C) between -4% and 28%.
D) between 4% and 20%.
11) Which of the following investments is clearly preferred to the others for an investor who is not holding a well-diversified portfolio?
A 18% 20%
B 20% 20%
C 20% 22%
A) Investment A
B) Investment B
C) Investment C
D) Cannot be determined without information regarding the risk-free rate of return.
12) Assume that you have $330,000 invested in a stock that is returning 11.50%, $170,000 invested in a stock that is returning 22.75%, and $470,000 invested in a stock that is returning 10.25%. What is the expected return of your portfolio?
13) Assume that you have $100,000 invested in a stock that is returning 14%, $150,000 invested in a stock that is returning 18%, and $200,000 invested in a stock that is returning 15%. What is the expected return of your portfolio?
14) Investment A has an expected return of 15% per year, while investment B has an expected return of 12% per year. A rational investor will choose
A) investment A because of the higher expected return.
B) investment B because a lower return means lower risk.
C) investment A if A and B are of equal risk.
D) investment A only if the standard deviation of returns for A is higher than the standard deviation of returns for B.
15) Investment A has an expected return of 14% with a standard deviation of 4%, while investment B has an expected return of 20% with a standard deviation of 9%. Therefore
A) a risk averse investor will definitely select investment A because the standard deviation is lower.
B) a rational investor will pick investment B because the return adjusted for risk (20% – 9%) is higher than the return adjusted for risk for investment A ($14% – 4%).
C) it is irrational for a risk-averse investor to select investment B because its standard deviation is more than twice as big as investment A’s, but the return is not twice as big.
D) rational investors could pick either A or B, depending on their level of risk aversion.
16) The minimum rate of return necessary to attract an investor to purchase or hold a security is referred to as the
A) stock’s beta.
B) investor’s risk premium.
C) risk-free rate.
D) investor’s required rate of return.
17) Which of the following statements is MOST correct concerning diversification and risk?
A) Risk-averse investors often choose companies from different industries for their portfolios because the correlation of returns is less than if all the companies came from the same industry.
B) Risk-averse investors often select portfolios that include only companies from the same industry group because the familiarity reduces the risk.
C) Only wealthy investors can diversify their portfolios because a portfolio must contain at least 50 stocks to gain the benefits of diversification.
D) Proper diversification generally results in the elimination of risk.
18) Most stocks have betas between
A) -1.00 and 1.00.
B) 0.00 and 1.00.
C) 0.60 and 1.60.
D) 1.00 and 2.00.
19) Which of the following measures the average relationship between a stock’s returns and the market’s returns?
A) beta coefficient
B) standard deviation
C) geometric regression
D) coefficient of validation
20) An investor currently holds the following portfolio:
4,000 shares of Stock H $8,000 Beta = 1.3
7,500 shares of Stock I $24,000 Beta = 1.8
12,500 shares of Stock J $48,000 Beta = 2.2
The beta for the portfolio is
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
Custom Writings Help is a Quality-Oriented Company in Online Writing as a result of hiring exceptional professionals to execute clients' tasks.
At Custom Writings Help,We understand the struggle of research paper writing, and that is why at Custom WritingS Help, we are all out to help you. We pride ourselves on having a team of clinical writers. The stringent and rigorous vetting process ensures that only the 'BEST' Writers are chosen for the job. We have highly qualified Ph.D. and MA writers working with us; we equally offer these experienced writers specific bonuses and incentives to make them deliver highly original, unique, and informative content at reasonably low prices.
Thesis Writing Service
Worlwide, Many Masters Students are struggling with Thesis Completion. A thesis is likely to be the longest and most challenging piece of work a student has ever completed. However, unlike essays and other assignments, a student can pick a particular interest topic and work on their initiative. Fortunately, we are there for you. At Custom Writings Help, you are assured of an authentic, imaginative, informative, linguistically great, and advantageous thesis that adheres to all your needs. So, why continue considering different writers when you have discovered the best in the field?
Not a single student can avoid writing custom papers. However, a total lack of experience, skills, and time makes it very hard to produce a superb writing piece. Therefore, if you are seeking professional help, turn to us. Our specialized and experienced writers compose a variety of model papers, including custom essays, college term papers, research papers, book reports, MBA essays, executive summaries, dissertations, Ph.D. theses, admission essays, and research proposals for college and university students at any level.
Most of the students disregard the critical principles of essay writing and compose papers below sensible guidelines. Therefore, with Custom Writings Help, one should not worry about his/her essay. Our Writers compose informative and engaging content on all complexities and topics. We write meaningful and smart essays while prioritizing all aspects that bring about a good grade, such as impeccable grammar, proper structure, zero-plagiarism, and conformance to guidelines.
Coourse Work Writing
Don't let the seemingly never-ending onslaught of writing assignments get you down. If you are looking where to get course work assistance online, the writers at Custom Writings Help are here to assist you with all of your writing needs. We undertake to unique delivery of papers that meet the professor's requirements. The content is proofread, edited, and checked plagiarism before submission to customers. No matter how big or small your work is, we will deliver on time. Try US Now! !
Dissertation Writing Service
High-Quality Dissertation Writing Services are rare. They require Ph.D. academicians – not easily found. However, are an exception. The years, time, and resources we have invested in the dissertation world has given us a competitive advantage over others. Choose to come to Custom Writings Help; You will find perfect Ph.D. consultants who have written hundreds of dissertations theses ready to help you. Let our dissertation-writing services help you craft your dissertation, for you are assured we will give you the results.