1. An investment will produce an annual cash flow of $4000 for three years. The investor requires a 12% rate of return compounded annually. What is the maximum amount that the investor can pay and still earn the required rate of return?

A. $9,607

B. $10,218

C. $10,714

D. $12.000

2. Robin purchased a stock at a stock at a price of $18 a share. She received quarterly dividends of $0.5 per share. After one year, Robin sold the stock at a price of $19.50 a share. What is her percentage total return on this investment?

A. 10.3%

B. 11.1%

C. 17.9%

D. 19.4%

3. The markets in general are paying a 3% real rate of return. Inflation is expected to be 2%. ABC stock commands a 6% risk premium. What is the risk-free rate of return?

4. An investment produced annual rates of return of 5%, 12%, 8% and 11% respectively over the past four years. What is the standard deviation of these returns?

5. What is the expected return on a stock with a beta of 1.09, a market risk premium of 8%, and a risk-free rate of 4%?

6. The risk-free rate of return is 4%, while the market rate of return is 11%. Delta Company has a historical beta of 1.25. Today, the beta for Delta Company was adjusted to reflect internal changes in the structure of the company. The new beta is 1.38. What is the amount of the change in the expected rate of return for Delta Company based on this revision to beta?

7. Dr. Zweibel's portfolio consists of four stocks: AZMN, 35%, beta 2.4; MKR, 20%, beta 1.6; ABDE, 2.5%, beta 1.8; and SBUK, 20%, beta 2.1. Compute Dr. Z's portfolio beta. Does he seem to be a conservative or aggressive investor?

8. Assume that an investor generates the following income stream and can be purchased at the beginning of 2009 for $1000 and sold at the end of 2015 for $1200. Estimate the yield for this investment. If a minimum return of 9% is required, would you recommend this investment? Explain.