1. Based on the next year’s dividend, the dividend yield of a stock is 5.5%. The dividend growth rate is assumed to be 4%. What is the required rate of return for the stock?

a. 1.5%                        b. 4.18%                      c. 5.72%                      d. 9.50%

2. The price of book ZXY is 2x while its peers are trading around 3x. What would be the implied price of ZXY if its book value per share if $35 and it’s worth as much as its peers?

a. $105                        b. $70                          c. $17.5                       d. $11.67

3. In order to find the Minimum Variance Portfolio (MVP), which constraints do you include in the Markowitz’s portfolio variance minimization process? Assume no short sale is allowed.

I) Expected Return = a specified return

II) The weight on each stock must be greater than or equal to zero

III) The sum of all weights must add to 100%

a. I only                       b. II and III only           c. I and III                   d. I, II, and III

4. Firm ZXY has $20 mil in Debt, $30 mil in Book Value, $90 mil in Total Asset and a market value of $65 mil. The earning for the year is $8 mil. Its return on capital is

a. 16.0%                      b. 9.4%                        c. 8.89%                      d. 5.71%