1. Say you own an asset that had a total nominal return last year of 14 percent. If the inflation rate last year was 5 percent, what was your real return?

8.57%

9.00%

-7.89%

None of these are correct.

8.47%

2. An investment offers a 7.0 percent total nominal return over the coming year. Bill Bernanke thinks the total real return on this investment will be only 3.5 percent. What does Bill believe the inflation rate will be over the next year?

3.50%

4.40%

None of these are correct.

3.38%

-3.27%

3. Metroplex Corporation will pay a $2.70 per share dividend next year. The company pledges to increase its dividend by 6.10 percent per year indefinitely. If you require a 10.20 percent return on your investment, how much will you pay for a share of the stock today?

$62.07

$72.57

None of these are correct.

$15.61

$65.85

4. Apocalyptica Corp. pays a constant $19 dividend on its stock. The company will maintain this dividend for the next 8 years and will then cease paying dividends forever. If the required return is 6 percent, what is the share price?

$152.00

None of these are correct.

$117.99

$123.89

$125.07