Question

# 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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