1) Macy's preferred stock pays $14 in annual dividends. If your required rate of return is 7.61%, how much would you be willing to pay for one share of this preferred stock?
a) $22.34
b) $2.34
c) $183.97
d) $1.83
2) Golden Rod Corp.'s preferred stock os currently selling for 83. The company pays $6 annual dividends on this preferred stock. Which rate of return does the investor expect to receive on this stock, if stock is purchased today?
a) 1440%
b) 21.23%
c) 7.23%
d) 19.25%
3) Silver Coins Corp's preferred stock is selling for $67. The company pays $8 annual dividends on this preferred stock. Which rate of return does the investor expect to receive on this stock, if the stock is purchased today?
a) 11.94%
b) 15.43%
c) 20.64%
d) 1.94%
4) The Black Forest Cake Company just paid an annual dividend of $1.25. If you expect a constant growth rate of 5.98%, and have a require rate of return of 10.71%, what is the current stock price according to the constant growth dividend model (Gordon model)?
a) $28.01
b) $26.25
c) $21.99
d) $56.01
5) You are considering the purchase of Crown Bakery, Inc. common stock that just paid a dividend of $20 per share. You expect the dividend to grow at the rate of 5.28% per year, indefinitely. You estimate that a required rate of return of 12.25%, will be adequate compensation for this investment. What is the most that you would be willing to pay for the common stock, if you purchase it today?
a) $305.45
b) $23.93
c) $302.09
d) $45.68
6) The next year the common stock of Gold Corp. will pay a dividend of $7.26 per share. If the company is growing at a rate of 3.67% per year, and your required rate or return is 11.84%, what is Gold's company stock worth to you?
a) $88.86
b) $23.10
b) $50.86
c) $90.83
7) You are considering the purchase of a share of Gamma Growth, Inc. common stock. You expect to sell it at the end of one year for $6 per share. You will also receive a dividend of $2.56 per share at the end of the next year. If your required return on this stock is 8.34%, what is the most you would be willing to pay for Alfa Growth, Inc. common stock now?
a) $67.91
b) Not enough information
c) $54.05
d) $101.25
8) Try to determine the required rate of return on Tilden Woods Corporation's common stock. The firm's beta is 2. The rate on a 10-year treasury bond is 2.33%, and the market return is 5.06%
a) 7.79%
b) 17.74%
c) 12.77%
d) 5.67%
9) Small Farm Manufacturing Company's common stock has a beta of 2.3. If the risk-free return is 4.88%, and the market risk premium 8.24%, calculate the required return on Small farm Manufacturing's common stock.
a) 12.80%
b) 23.83%
c) 16.85%
d) 7.63%
10) You hold a portfolio with the following securities:
Security Percent of portfolio Beta
Stock A 35% 2.31
Stock B 15% 1.33
Stock C 50% 2.10
Calculate the beta portfolio.
a) 3.16
b) 1.06
c) 2.06
d) 3.98
11) Jack hold a portfolio with the following securities:
Security Market Value Beta
Stock A $346,474 0.70
Stock B $127,159 1.39
Stock C $360,0720 1.44
Calculate the beta portfolio.
a) 3.27
b) 2.15
c) 2.64
d) 1.13
12) Tom hold a portfolio with the following securities:
Security Market Value Beta
Stock A 462,970 0.60
Stock B 874,483 2.15
Stock C 815,868 1.63
Calculate the beta portfolio.
a) 1.62
b) 5.63
c) 2.82
d) 3.82
13) You hold a portfolio with the following securities:
|
Security
|
% of portfolio
|
Expected Return of Stock
|
|
Stock A
|
26%
|
13.87%
|
|
Stock B
|
45%
|
9.45%
|
|
Stock C
|
29%
|
6.23%
|
Calculate the portfolio expected return.
a) 9.67%
b) 15.97%
c) 19.87%
d) 12.57%
14) You hold a portfolio with the following securities:
|
Security
|
% of portfolio
|
Expected Return of Stock
|
|
Stock A
|
35%
|
12.02%
|
|
Stock B
|
28%
|
17.59%
|
|
Stock C
|
37%
|
8.43%
|
Calculate the portfolio expected return.
a) 35.45%
b) 13.65%
c) 12.25%
d) 22.25%
15) Calculate expected return of stock:
|
State of economy
|
Probability of the states
|
% returns on stock
|
|
Economic recession
|
26%
|
-10.5%
|
|
Boom
|
19%
|
25.6%
|
|
Steady economic growth
|
55%
|
5.9%
|
Calculate the portfolio expected return.
a) 5.38%
b) 7.98%
c) 11.28%
d) 3.38%
16) Calculate standard deviation of the stock returns:
|
State of economy
|
Probability of the states
|
% returns on stock
|
|
Economic recession
|
8%
|
2.69%
|
|
Boom
|
56%
|
16.7%
|
|
Steady economic growth
|
23%
|
4.5%
|
Calculate the portfolio expected return.
a) 16.34%
b) 6.24%
c) 5.23%
d) 2.86%
17) The prices for the Black swan Corporation for the first quarter of the last year are given below. Find the holding period return (percentage return) for February.
End of the month Stock price
January $54
February $58
March $59
a) 13.45%
b) 7.41%
c) 2.35%
d) 8.98%
18) The prices for the Black swan Corporation for the first quarter of the last year are given below. Find the holding period return (percentage return) for March.
End of the month Stock price
January $54
February $58
March $59
a) 16.87%
b) 1.71%
c) 5.75%
d) 4.09%
19) Carol purchased 100 shares of Fall Weather, Inc. stock of at a price of $34.15 two years ago. She sold all stocks today for $31.35. During the year the stock paid dividends of $2.25 per share. What is carol's holding period return?
a) 1.61%
b) 12.14%
c) 3.45%
d) -1.61%
20) Mary purchased 100 shares of Summer Rain, Inc. stock of at a price of $54.51 four months ago. She sold all stocks today for $53.31. During the year the stock paid dividends of $2.25 per share. What is Mary's holding period return?
a) 1.93%
b) 12.53%
c) 20.66%
d) 2.83%
21) Pink Company's common stock is currently selling for $53 per share. Last year, the company paid dividends of $4.40 per share. The projected growth at a rate of dividends for this stock is 5.19%. which rate of return does the investor expect to receive on this stock if it is purchased today?
a) 10.91%
b) 7.72%
c) 23.98%
d) 13.92%