FIN335 Ciner (problems)

A stock has produced returns of 11 percent, 18 percent, -6 percent, -13 percent, and 21 percent for the past five years, respectively. What is the standard deviation of these returns? A. 7.75 percent B. 8.87 percent C. 9.23 percent D. 14.99 percent E. 16.64 percent

D

A stock has produced returns of 16.6 percent, 3.4 percent, 11.7 percent, and -9.2 percent over the past four years, respectively. What is the geometric average return? A. 5.16 percent B. 5.47 percent C. 6.23 percent D. 6.61 percent E. 10.12 percent

A

Aaron's Rentals has 58,000 shares of common stock outstanding at a market price of $36 a share. The common stock just paid a $1.64 annual dividend and has a dividend growth rate of 2.8 percent. There are 12,000 shares of 6 percent preferred stock outstanding at a market price of $51 a share. The preferred stock has a par value of $100. The outstanding bonds mature in 17 years, have a total face value of $750,000, a face value per bond of $1,000, and a market price of $1,011 each. The bonds pay 8 percent interest, semiannually. The tax rate is 34 percent. What is the firm's weighted average cost of capital? A. 7.74 percent B. 8.68 percent C. 9.29 percent D. 9.97 percent E. 10.30 percent

A

Beasley Enterprises stock has an expected return of 11.5 percent. Given the information below, what is the expected return if the economy is in a recession? State of Economy: Boom, Normal. Recession Probability of state of Economy(respectively): 0.18, 0.65, 0.17 Rate of Return(respectively): ?, 0.13, 0.24 A. -5.72 percent B. -11.71 percent C. -11.28 percent D. -10.76 percent E. 5.72 percent

A

Judy's Boutique just paid an annual dividend of $1.65 on its common stock. The firm increases its dividend by 2.5 percent annually. What is the rate of return on this stock if the current stock price is $38.20 a share? A. 6.93 percent B. 7.37 percent C. 7.54 percent D. 8.19 percent E. 8.33 percent

A

Noah's Landing stock is expected to produce the following returns given the various states of the economy. What is the expected return on this stock? State of Economy: Boom, Normal. Recession Probability of state of Economy(respectively): 0.3, 0.65, 0.05 Rate of Return(respectively): -0.27, 0.16, 0.35 A. 4.05 percent B. 4.23 percent C. 4.51 percent D. 5.47 percent E. 20.26 percent

A

One year ago, you purchased a 5 percent coupon bond with a face value of $1,000 when it was selling for 101.2 percent of par. Today, you sold this bond for 99.8 percent of par. What is your total dollar return on this investment? A. $36 B. $60 C. $64 D. $74 E. $82

A

Over the past four years, a stock produced returns of 23 percent, -39 percent, 4 percent, and 16 percent, respectively. Based on these four years, what range of returns would you expect to see 99 percent of the time? A. -82.39 percent to 84.39 percent B. -82.39 percent to 86.41 percent C. -82.39 percent to 88.56 percent D. -78.46 percent to 86.41 percent E. -78.46 percent to 84.39 percent

A

Smith and Weston has 55,000 shares of common stock outstanding at a price of $31 a share. It also has 3,000 shares of preferred stock outstanding at a price of $62 a share. The firm has 8 percent, 12-year bonds outstanding with a total face value of $400,000. The bonds are currently quoted at 101.2 percent of face and pay interest semiannually. What is the capital structure weight of the firm's preferred stock if the tax rate is 35 percent? A. 8.10 percent B. 15.20 percent C. 15.67 percent D. 16.84 percent E. 17.63 percent

A

The common stock of Contemporary Interiors has a beta of 1.65 and a standard deviation of 27.4 percent. The market rate of return is 13.2 percent and the risk-free rate is 4.8 percent. What is the cost of equity for this firm? A. 18.66 percent B. 18.76 percent C. 21.08 percent D. 24.40 percent E. 26.05 percent

A

USA Manufacturing issued 30-year, 8.5 percent semiannual bonds 6 years ago. The bonds currently sell at 101 percent of face value. What is the firm's aftertax cost of debt if the tax rate is 30 percent? A. 5.88 percent B. 5.62 percent C. 5.76 percent D. 6.59 percent E. 8.40 percent

A

Western Electric has 23,000 shares of common stock outstanding at a price per share of $57 and a rate of return of 14.2 percent. The firm has 6,000 shares of 7 percent preferred stock outstanding at a price of $48 a share. The preferred stock has a par value of $100. The outstanding debt has a total face value of $350,000 and currently sells for 102 percent of face. The yield to maturity on the debt is 8.49 percent. What is the firm's weighted average cost of capital if the tax rate is 34 percent? A. 12.69 percent B. 13.44 percent C. 14.19 percent D. 14.47 percent E. 14.92 percent

A

You own a $46,000 portfolio comprised of four stocks. The values of Stocks A, B, and C are $5,600, $16,700, and $11,400, respectively. What is the portfolio weight of Stock D? A. 24.57 percent B. 25.39 percent C. 30.33 percent D. 32.10 percent E. 32.58 percent

A

Last year, Isaac earned 10.6 percent on her investments while U.S. Treasury bills yielded 3.8 percent and the inflation rate was 3.1 percent. What real rate of return did she earn on her investments last year? A. 6.63 percent B. 7.27 percent C. 8.56 percent D. 9.24 percent E. 10.39 percent

B

Musical Charts just paid an annual dividend of $2.45 per share. This dividend is expected to increase by 3.3 percent annually. Currently, the firm has a beta of 1.09 and a stock price of $36 a share. The risk-free rate is 4.2 percent and the market rate of return is 12.6 percent. What is the cost of equity capital for this firm? A. 10.28 percent B. 11.84 percent C. 12.29 percent D. 12.95 percent E. 13.42 percent

B

Over the past six years, a stock had annual returns of 14 percent, -3 percent, 8 percent, 21 percent, -16 percent, and 4 percent, respectively. What is the standard deviation of these returns? A. 11.27 percent B. 13.05 percent C. 13.59 percent D. 15.08 percent E. 14.40 percent

B

The Green Balloon just paid its first annual dividend of $0.12 a share. The firm plans to increase the dividend by 3.5 percent per year indefinitely. What is the firm's cost of equity if the current stock price is $6.50 a share? A. 5.35 percent B. 5.41 percent C. 14.42 percent D. 18.79 percent E. 19.98 percent

B

The preferred stock of Dolphin Pools pays an annual dividend of $6.25 a share and sells for $42 a share. The tax rate is 35 percent. What is the firm's cost of preferred stock? A. 9.67 percent B. 14.88 percent C. 15.07 percent D. 15.59 percent E. 16.47 percent

B

The risk-free rate is 4.2 percent and the expected return on the market is 12.3 percent. Stock A has a beta of 1.2 and an expected return of 13.1 percent. Stock B has a beta of 0.75 and an expected return of 11.4 percent. Are these stocks correctly priced? Why or why not? A. No, Stock A is underpriced and Stock B is overpriced. B. No, Stock A is overpriced and Stock B is underpriced. C. No, Stock A is overpriced but Stock B is correctly priced. D. No, Stock A is underpriced but Stock B is correctly priced. E. Yes, both stocks are correctly priced.

B

You expect the inflation rate to be 3.8 percent and the U.S. Treasury bill yield to be 3.9 percent for the next year. The risk premium on small-company stocks is 12.6 percent. What nominal rate of return do you expect to earn on small-company stocks next year? A. 15.5 percent B. 16.5 percent C. 16.8 percent D. 9.2 percent E. 8.8 percent

B

You own a portfolio that is invested as follows: $11,400 of Stock A, $8,800 of Stock B, $14,900 of Stock C, and $3,200 of Stock D. What is the portfolio weight of Stock C? A. 38.47 percent B. 38.90 percent C. 39.80 percent D. 41.94 percent E. 43.08 percent

B

Your portfolio has provided you with returns of 8.6 percent, 14.2 percent, -3.7 percent, and 12.0 percent over the past four years, respectively. What is the geometric average return for this period? A. 7.25 percent B. 7.54 percent C. 7.57 percent D. 7.63 percent E. 9.55 percent

B

BJB, Inc. stock has an expected return of 15.15 percent. The risk-free rate is 3.8 percent and the market risk premium is 8.6 percent. What is the stock's beta? A. 1.19 B. 1.21 C. 1.32 D. 1.48 E. 1.62

C

Country Kitchen's cost of equity is 15.3 percent and its aftertax cost of debt is 6.9 percent. What is the firm's weighted average cost of capital if its debt-equity ratio is 0.58 and the tax rate is 30 percent? A. 8.94 percent B. 11.47 percent C. 12.21 percent D. 12.28 percent E. 13.01 percent

C

Fiddler's Music Stores' stock has a risk premium of 9.6 percent while the inflation rate is 4.1 percent and the risk-free rate is 3.9 percent. What is the expected return on this stock? A. 12.3 percent B. 12.7 percent C. 13.5 percent D. 13.7 percent E. 16.5 percent

C

Given the following information, what is the standard deviation of the returns on this stock? State of Economy: Boom, Normal. Recession Probability of state of Economy(respectively): 0.20, 0.70, 0.10 Rate of Return(respectively): 0.21, 0.13, -0.09 A. 7.38 percent B. 7.55 percent C. 7.80 percent D. 7.91 percent E. 8.06 percent

C

One year ago, you bought a stock for $36.48 a share. You received a dividend of $1.62 per share last month and sold the stock today for $41.18 a share. What is the capital gains yield on this investment? A. 2.86 percent B. 4.70 percent C. 12.88 percent D. 15.62 percent E. 18.53 percent

C

Over the past five years, a stock returned 8.3 percent, -32.5 percent, -2.2 percent, 46.9 percent, and 11.8 percent, respectively. What is the variance of these returns? A. 0.071188 B. 0.076290 C. 0.081504 D. 0.082547 E. 0.091306

C

Sarah earned a 2.9 percent real rate of return on her investments for the past year. During that time, the risk-free rate was 4.1 percent and the inflation rate was 3.6 percent. What was her nominal rate of return? A. 5.30 percent B. 6.06 percent C. 6.60 percent D. 6.67 percent E. 6.91 percent

C

The Five and Dime Store has a cost of equity of 15.8 percent, a pretax cost of debt of 7.7 percent, and a tax rate of 35 percent. What is the firm's weighted average cost of capital if the debt-equity ratio is 0.40? A. 10.18 percent B. 11.72 percent C. 12.72 percent D. 13.49 percent E. 14.93 percent

C

The common stock of Hillshire Farms has yielded 16.3 percent, 7.2 percent, 11.8 percent, -3.6 percent, and 9.7 percent over the past five years, respectively. What is the geometric average return? A. 7.91 percent B. 8.03 percent C. 8.07 percent D. 8.27 percent E. 9.64 percent

C

The stock of Southern United is priced at $40 a share and has a dividend yield of 2.1 percent. The firm pays constant annual dividends. What is the amount of the next dividend per share? A. $0.021 B. $0.210 C. $0.840 D. $0.871 E. $0.875

C

Bama Entertainment has common stock with a beta of 1.46. The market risk premium is 9.3 percent and the risk-free rate is 4.6 percent. What is the expected return on this stock? A. 16.31 percent B. 16.67 percent C. 17.40 percent D. 18.18 percent E. 18.13 percent

D

Kim's Bridal Shoppe has 15,000 shares of common stock outstanding at a price of $11 a share. It also has 2,000 shares of preferred stock outstanding at a price of $34 a share. There are 50 bonds outstanding that have a 7.5 percent semiannual coupon. The bonds mature in six years, have a face value of $1,000, and sell at 96 percent of par. What is the capital structure weight of the common stock? A. 24.20 percent B. 31.68 percent C. 53.15 percent D. 58.72 percent E. 66.23 percent

D

Sugar and Spice stock is expected to produce the following returns given the various states of the economy. What is the expected return on this stock? State of Economy: Boom, Normal. Recession Probability of state of Economy(respectively): 0.05, 0.7, 0.25 Rate of Return(respectively): 0.05, 0.09, 0.14 A. 7.89 percent B. 8.56 percent C. 9.43 percent D. 10.05 percent E. 10.50 percent

D

You own a portfolio that is invested 38 percent in Stock A, 43 percent in Stock B, and the remainder in Stock C. The expected returns on these stocks are 10.9 percent, 15.4 percent, and 9.1 percent, respectively. What is the expected return on the portfolio? A. 10.55 percent B. 11.02 percent C. 11.67 percent D. 12.49 percent E. 13.05 percent

D

Ben & Terry's has an expected return of 12.9 percent and a beta of 1.25. The expected return on the market is 11.7 percent. What is the risk-free rate? A. 3.87 percent B. 4.24 percent C. 4.61 percent D. 6.29 percent E. 6.92 percent

E

Five years ago, you purchased 600 shares of stock. The annual returns have been 7.2 percent, -19.4 percent, 3.8 percent, 14.2 percent, and 27.9 percent, respectively. What is the variance of these returns? A. 0.0298 B. 0.0300 C. 0.0307 D. 0.0301 E. 0.0229

E

Given the following information, what is the standard deviation of the returns on this stock? State of Economy: Boom, Normal. Recession Probability of state of Economy(respectively): 0.04, 0.74, 0.22 Rate of Return(respectively): 0.26, 0.17, -0.44 A. 19.90 percent B. 20.52 percent C. 22.41 percent D. 23.79 percent E. 25.52 percent

E

Hercules Movers pays a constant annual dividend of $1.75 per share on its stock. Last year at this time, the market rate of return on this stock was 14.8 percent. Today, the market rate has fallen to 11.2 percent. What would your capital gains yield have been if you had purchased this stock one year ago and then sold the stock today? A. 18.78 percent B. 22.03 percent C. 28.16 percent D. 30.00 percent E. 32.14 percent

E

One year ago, you purchased 500 shares of stock for $12 a share. The stock pays $0.22 a share in dividends each year. Today, you sold your shares for $28.30 a share. What is your total dollar return on this investment? A. $6,222 B. $7,432 C. $8,150 D. $7,775 E. $8,260

E

Over the past four years, a stock produced returns of 15 percent, 6 percent, 11 percent, and 22 percent, respectively. Based on these four years, what range of returns would you expect to see 95 percent of the time? A. -6.58 percent to 31.33 percent B. -6.58 percent to 27.02 percent C. -6.58 percent to 24.39 percent D. -0.02 percent to 24.39 percent E. -0.02 percent to 27.02 percent

E

The 7.5 percent preferred stock of Home Town Brewers is selling for $45 a share. What is the firm's cost of preferred stock if the tax rate is 35 percent and the par value per share is $100? A. 7.50 percent B. 15.92 percent C. 16.17 percent D. 16.52 percent E. 16.67 percent

E

You would like to create a portfolio that is equally invested in a risk-free asset and two stocks. One stock has a beta of 1.15. What does the beta of the second stock have to be if you want the portfolio to be equally as risky as the overall market? A. 0.78 B. 0.97 C. 1.23 D. 1.55 E. 1.85

E