MariJane Tripp
7)
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?
Probability
of
CommissionOccurrence
$15,000.15
$35,000.20
$48,000.35
$67,000.22
$80,000.18
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.
6)
Assume that you have $165,000 invested in a stock that is returning 11.50%,
$85,000 invested in a stock that is returning 22.75%, and $235,000 invested in
a stock that is returning 10.25%. What is the expected return of your
portfolio?
A)
15.6%
B)
12.9%
C)
18.3%
D)
14.8%
26)
Assume that an investment is forecasted to produce the following returns: a 20%
probability of a 12% return; a 50% probability of a 16% return; and a 30%
probability of a 19% return. What is the standard deviation of return for this
investment?
A)
5.89%
B)
16.1%
C)
2.43%
D)
15.7%
21)
Assume that Brady Corp. has an issue of 18-year $1,000 par value bonds that pay
7% interest, annually. Further assume that today's required rate of return on
these bonds is 5%. How much would these bonds sell for today? Round off to the
nearest $1.
A)
$1,233.79
B)
$1,201.32
C)
$1,134.88
D)
$1,032.56
13)
What is the value of a bond that matures in 17 years, makes an annual coupon
payment of $50, and has a par value of $1,000? Assume a required rate of return
of 6%.
A)
$822.90
B)
$856.29
C)
$895.23
D)
$904.87
18)
A company has preferred stock that can be sold for $21 per share. The preferred
stock pays an annual dividend of 3.5% based on a par value of $100. Flotation
costs associated with the sale of preferred stock equal $1.25 per share. The
company's marginal tax rate is 35%. Therefore, the cost of preferred stock is:
A)
18.87%.
B)
17.72%.
C)
14.26%.
D)
12.94%.
16)
Asian Trading Company paid a dividend yesterday of $5 per share (D0= $4). The
dividend is expected to grow at a constant rate of 8% per year. The price of
Asian Trading Company's stock today is $29 per share. If Asian Trading Company
decides to issue new common stock, flotation costs will equal $2.50 per share.
Asian Trading Company's marginal tax rate is 35%. Based on the above
information, the cost of retained earnings is
A)
28.38%.
B)
24.12%.
C)
26.62%.
D)
31.40%.
33)
Jiffy Co. expects to pay a dividend of $3.00 per share in one year. The current
price of Jiffy common stock is $60 per share. Flotation costs are $3.00 per
share when Jiffy issues new stock. What is the cost of internal common equity
(retained earnings) if the long-term growth in dividends is projected to be 8
percent indefinitely?
A)
13 percent
B)
14 percent
C)
15 percent
D)
16 percent