6.Afirmisexpectedtohavefouryearsofgrowthwitharetentionratioof100percent.Afterwardsthefirm’sdividendsareexpectedtogrow4percentannually,andthedividendpayoutratiowillbesetat50percent.Ifearningspershare(EPS=$2.4inyear5andtherequiredreturnonequityis10percent,whatisthestock’svaluetoday?Selectexactly1answersfromthefollowing:
A.$20.00.
B.$13.66.
C.$30.00.
D.$40.23.
7.Theearningsmultipliermodel,derivedfromthedividenddiscountmodel,expressesastock’sP/Eratio(P0/E1)asthe:Selectexactly1answersfromthefollowing:
A.expecteddividendinoneyeardividedbythedifferencebetweentherequiredreturnonequityandtheexpecteddividendgrowthrate.
B.expecteddividendpayoutratiodividedbythedifferencebetweentherequiredreturnonequityandtheexpecteddividendgrowthrate
.C.expecteddividendpayoutratiodividedbythesumoftheexpecteddividendgrowthrateandtherequiredreturnonequity.
D.dividendyieldplustheexpecteddividendgrowthrate.
8.WhichofthefollowingstatementsaboutreturnobjectivesisFALSE?Selectexactly1answersfromthefollowing:
A.Toachievethecapitalappreciationobjective,thenominalrateofreturnmustexceedtherateofinflation
B.Thetotalreturnobjectiveisriskierthanthecurrentincomeobjective.
C.Toachievethecapitalpreservationobjective,thenominalrateofreturnmustexceedtheinflationrate
D.Thetotalreturnobjectiveislessriskythanthecapitalappreciationobjective.
9.Ananalystiscurrentlyconsideringaportfolioconsistingoftwostocks.Thefirststock,RembaCo.,hasanexpectedreturnof12percentandastandarddeviationof16percent.Thesecondstock,Labs,Inc,hasanexpectedreturnof18percentandastandarddeviationof25percent.Thecorrelationofreturnsbetweenthetwosecuritiesis0.25.Iftheanalystformsaportfoliowith30percentinRembaand70percentinLabs,whatistheportfolio’sexpectedreturn?Selectexactly1answersfromthefollowing:
A.15.0%.
B.17.3%.
C.16.2%.
D.21.5%.
10.WhichofthefollowingstatementsregardingtheMarkowitzmodelofportfoliotheoryisFALSE?Themodelassumesinvestors:Selectexactly1answersfromthefollowing:
A.evaluateinvestmentopportunitiesasaprobabilitydistributionofexpectedreturnsoversometimeperiod.
B.viewthemeanofthedistributionofpotentialoutcomesastheexpectedriskofaninvestment.
C.estimateaportfolio’sriskonthebasisofthevariabilityofexpectedreturns.
D.preferhigherreturnstolowerreturnsiftheexpectedriskisthesame,andlessrisktomoreriskiftheexpectedreturnisthesame.
