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BUS 401 Week 2, Quiz


BUS 401 Week 2, Quiz fin571

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BUS 401 Week 2, Quiz
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This 0 page Study Guide was uploaded by an elite notetaker on Wednesday November 11, 2015. The Study Guide belongs to fin571 at Kaplan University taught by in Fall 2015. Since its upload, it has received 22 views.

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Date Created: 11/11/15
Grade Details 1 2 3 Question Student Answer Points Received Comments Question Student Answer Points Received Comments Question Student Answer Butler Corp paid a dividend of 350 per share The dividend is expected to grow at a constant rate of 8 per year If Butler Corp ls selling for 7560 per share the stockholders39 expected rate of return is 1263 F 1253 F 1300 if 1438 F 1 of 1 Emery Inc has a beta equal to 15 and a required return of 14 based on the CAPM If the risk free rate of return is 2 the expected return on the market portfolio is 1 0 1 9 1 8 if 6 F 0 of 1 The capital asset pricing model Provides a risk return trade off in which risk is measured in terms of the market volatility Provides a risk return trade off in which risk is measured in terms of beta Measures risk as the coefficient of variation between security and market rates of return Points Received Comments Question Student Answer Points Received Comments Question Student Answer Points Received Comments Question Depicts the total risk of a security 11quot 1of1 Stock A has an expected return of 14 with a standard deviation of 6 If returns are normally distributed then approximately two third of the time the return on Stock A will be Between 10 and 18 1 quot Between 8 and 20 1 Less than 8 if Between 6 and 14 ifquot 1 of1 A corporate coup bond has a coupon rate of 9 a face value of 1000 and matures in 15 years Which of the following statements in most correct An investor with a required rate of return of 10 will value the bond at more than 1000 An investor who buys the bond for 900 and holds the bond until maturity will have a capital loss An investor who buys the bond for 900 will have a yield to maturity on the bond greater than 9 If the bonds market price is 900 then the annual interest payments on the bond will be 81 1of1 Investment A has an expected rate of return of 15 per year while investment B has an expected rate 7 8 Student Answer Points Received Comments Question Student Answer Points Received Comments Question Student Answer of return of 12 o per year A rational investor will choose Investment A because of the higher expected return f Investment B because a lower return means a lower risk f Investment A if A and B are of equal risk 6 Investment A only if the standard deviation of returns for A is higher than the standard deviation f of returns for B 1of1 A financial analyst tells you that investing in stocks will allow you to triple your money in 15 years What annual rate of return is the analyst assuming you can earn 718 f 760 814 f 945 f 1 of1 SWH Corporation issued bonds on January 1 2004 The bonds had a coupon rate of 45 with interest paid semiannually The face of the bonds is 1000 and the bonds mature on January 1 2014 What is the intrinsic value to the nearest dollar of an SWH Corporation bond on January 1 2008 to an investor with a required return of 6 888 1 925 6 Points Received Comments 9 Question Student Answer Points Received Comments 10 Question Student Answer Points Received Comments 916 947 1of1 Which of the following statements concerning stock valuation is most correct The free cash flow method will result in a higher valuation than the dividend valuation method itquot because cash flows are higher than dividends The free cash flow method can only be used if a company does not pay dividends if The dividend valuation approach is more accurate than the free cash flow approach itquot When using the free cash flow method interest bearing debt must be subtracted from firm value if to determine the stock value 1of1 You are 21 years old today Your grand parents set up a fund that will pay you 25000 per year for 20 years starting on your 65th birthday to supplement your retirement If the trust can earn 75 per year how much will your grand parents need to put in the trust fund today rounded to the nearest ten dollars 11370 inquot 22310 1 5250 1quot 17450 1 quot 1 of1


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