1) Kip owns the following portfolio of securities. What is the beta for the portfolio?
A) 1.98 B) 1.00 C) 1.50 D) 1.74
2) George is considering an investment in Vandelay Inc. and has gathered the information in the following table. What is the expected standard deviation for a share of the firm’s stock?
A) 31.62% B) 22.48 C) 17.46% D) 27.54%
3) Alice purchased Hampton Industries Inc. stock for \$14.65 and sold it 6 months later for \$17.38 after receiving a \$0.25 dividend.
Company
Beta
Percent of Portfolio
Apple
.82……………..
What was Alice’s holding period return (HPR), Annual Percentage Rate (APR), and Effective Annual Rate (EAR)?
A) 20.34%, 40.68%, 44.82% B) 18.63%, 37.27%, 40.74% C) 17.15%, 34.29%, 37.23% D) 20.34%, 40.68%, 9.70%
4) Acme, Inc. is considering a four-year project that has an initial outlay or cost of \$100,000. The respective future cash inflows from its project for years 1, 2, 3 and 4 are: \$50,000, \$40,000, \$30,000 and \$20,000. Will it accept the project if its payback period is 31 months?
A) No, because it pays back in over 31 months. B) Yes, because it pays back in 25 months.
C) No, because it pays back in over 35 months. D) Yes, because it pays back in 28 months.
5) Morgan, Inc. is considering an eight-year project that has an initial after-tax outlay or after-tax cost of \$180,000. The future after-tax cash inflows from its project for years 1 through 8 are the same at \$35,000. Morgan uses the net present value method and has a discount rate of 12%. Will Morgan accept the project?
A) Morgan rejects the project because the NPV is below -\$7,000. B) Morgan rejects the project because the NPV is about -\$6,133. C) Morgan accepts the project because the NPV is about \$6,141. D) Morgan accepts the project because the NPV is over \$10,000.
6) Consider the following four-year project. The initial outlay or cost is \$180,000. The respective cash inflows for years 1, 2, 3 and 4 are: \$100,000, \$80,000, \$80,000 and \$20,000. What is the discounted payback period if the discount rate is 11%?