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Objectives :- 1. The last dividend paid by New common stock was $5 per share. ($5...

Objectives :-

1. The last dividend paid by New common stock was $5 per share. ($5 =D0 here.) The dividends are expected to grow at 6% forever. If the required rate of return on New stock is 11% annually, what is the price of this stock?

a.    $100

b.    $ 93

c.     $83

d) $106

2. The beta coefficient of a stock is a measure of its

               a.   unsystematic risk

               b.   systematic risk

               c.   total risk

               d.   company specific risk

               e.   two of the above

3. You purchased a bond for $1200 one year ago and plan to sell it today for $1350. Today, you receive your only interest payment for the year of $90. Your percentage return on this investment is _____.

  1. 20.0%
  2. 9.0%
  3. 17.8%
  4.   7.5%
  5. 18.4%

4. What is the expected market risk premium if the expected return on asset A is 14% and the risk free rate is 5%? Asset A has a beta of 1.5

  1. 6%  
  2. 9%
  3. 12%
  4. 19.5%
  5. 13.5%
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