CHAPTER 6 RISK‚ RETURN‚ AND THE CAPITAL ASSET PRICING MODEL True/False Easy: | |(6.2) Payoff matrix |Answer: a |EASY | |[i]. |A payoff matrix shows the set of possible rates of return on an investment‚ along with their probabilities of occurrence‚ and the | | |investment’s expected rate of return as found by multiplying each outcome or "state" by its probability.
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Examination One Assume that you recently graduated with a degree in finance and have just reported to work as an investment advisor at the brokerage firm of Balik and Kiefer Inc. One of the firm’s clients is Michelle Dellatorre‚ a professional tennis player who has just come to the United States from Chile. Dellatorre is a highly ranked tennis player who would like to start a company to produce and market apparel that she designs. She also expects to invest substantial amounts of money through
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------------------------------------------------- CHAPTER 24 ------------------------------------------------- Portfolio Theory‚ Asset Pricing Models‚ and Behavioral Finance Please see the preface for information on the AACSB letter indicators (F‚ M‚ etc.) on the subject lines. True/False Easy: (24.4) SML FN Answer: b EASY . The slope of the SML is determined by the value of beta. a. True
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Chapter 6: Interest Rates The difficulty of these questions as seen by students will depend on (1) what was discussed in class and (2) how long students have to answer the questions. If time is not an issue‚ then many of the questions could be classified as EASY‚ but under exam conditions with time pressure‚ many might be regarded as being CHALLENGING. So‚ consider the amount of time students have when selecting questions for an exam. Note that there is some overlap between the True/False and the
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holding everything else constant? Student Answer: 7.57% 7.95% 8.35% 8.76% 9.20% Instructor Explanation: $312‚900*15%=46‚935; 46‚935/$620‚000=7.57% Points Received: 0 of 10 Comments: 4. Question : (TCO B) Suppose a state of Delaware bond will pay $1‚000 10 years from now. If the going interest rate on these 10-year bonds is 5.5%‚ how much is the bond worth today? Student Answer: $585.43 $614.70 $645.44 $677.71 $711.59 Instructor
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FIN 515 Week 4 : Business Valuation and Stock Valuation - Exam Top of Form Exam 1. (TCO A) Which of the following statements is CORRECT? (Points : 10) It is generally more expensive to form a proprietorship than a corporation because‚ with a proprietorship‚ extensive legal documents are required. Corporations face fewer regulations than sole proprietorships. One disadvantage of operating a business as a sole proprietorship is that the firm is subject to double taxation
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[pic] |1. (TCO A) Which of the following statements is CORRECT? (Points : 10) | | | | [pic] One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability. | | [pic] It is generally easier to transfer one’s ownership
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HW FIN 3331 Chapter 9 9.1. Warr Corporation just paid a dividend of $1.50 a share (that is‚ D0 = $1.50). The dividend is expected to grow 7% a year for 3 years and then at 5% a year thereafter. What is the expected dividend per share for each of the next 5 years? D0 = $1.50; g1-3 = 7%; gn = 5%; D1 through D5 = ? D1 = D0(1 + g1) = $1.50(1.07) = $1.6050. D2 = D0(1 + g1)(1 + g2) = $1.50(1.07)2 = $1.7174. D3 = D0(1 + g1)(1 + g2)(1 + g3) = $1.50(1.07)3 = $1.8376. D4 = D0(1 + g1)(1 + g2)(1 + g3)(1 +
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2V)/3] (D1 + P1 - P0) / P0 σ/r D1/(rs – g) S/no. of shares (D1 / P0) + g [D1 / P0(1 - F)] + g i(1 - t) rRF + bi (rM - rRF) wdrd (1 - t) + weke ROE(Retention ratio) Retained earnings / Equity fraction [(EBIT - rdD)(1 - T)] / rs D + [(EBIT - rdD)(1 - T)] / rs D+S n Σ⎡_ INT/(1 + Kd)t ⎤ + M/(1 + rd)n ⎢ ⎥ ⎣t = 1 ⎦ EBIT(1 -t) / rsU Vu + TD - PV(distress + agency costs) rRF + bu(rM - rRF) + bu(rM - rRF)(1 - T)(D / S) rsU + (rsU –rd)(1 – T)(D/S) bu[1 + (1 - T)(D / S)] 6 Copyright © The Open Polytechnic
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Chapter 6 (11ed. Ch.)4 Risk and Return: The Basics MINI CASE Assume that you recently graduated with a major in finance‚ and you just landed a job as a financial planner with Barney Smith Inc.‚ a large financial services corporation. Your first assignment is to invest $100‚000 for a client. Because the funds are to be invested in a business at the end of one year‚ you have been instructed to plan for a one-year holding period. Further‚ your boss has restricted you to the following investment
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