Subject: Business    / Finance    

Question

Question 1: The correlation between the return on two assets _____
    is calculated by dividing the covariance of returns by the product of the standard deviations of the returns for the two assets.
    will always have a value between -1.0 and +1.0.
    measures the relative relationship between the returns of pair of assets.
    all of the above.

Which one is correct?

Question 2: Cavincare has 50 years remaining on a service contract with Martin, Inc. Today, Martin paid $120,000 for services received last year and the annual payment increases by 2.5% each year. The firm's required rate of return is 15%. What is the value of the contract to Cavincare? (Do not round intermediate calculations. Round the final answer to the nearest whole dollar amount.)
    $915,000
    $974,634
    $987,131
    $980,879

Which one is correct???????

Question 3:The simple interest rate charged per period multiplied by the number of payment periods per year gives the:
    simple interest rate
    effective annual interest rate
    compound interest rate
    annual percentage rate

Which one is correct????????

Question 4: In order to expect that it will fund her retirement, Glenda needs her portfolio to have an expected return of 13.6 percent per year over the next 30 years. She has decided to invest in Stocks 1, 2, and 3, with 25 percent in Stock 1, 50 percent in Stock 2, and 25 percent in Stock 3. If Stocks 1 and 2 have expected returns of 9 percent and 10 percent per year, respectively, then what is the minimum expected annual return for Stock 3 that is likely to enable Glenda to achieve her investment requirement? (Round answer to 1 decimal place, e.g. 17.5%.)

Expected annual return????????? %


Question 5: Barbara is considering investing in a company's stock and is aware that the return on that investment is particularly sensitive to how the economy is performing. Her analysis suggests that four states of the economy can affect the return on the investment.

Probability    Return
Boom    0.4    25.00%
Good    0.1    15.00%
Level    0.1    10.00%
Slump    0.4    

-5.00%

a) Use the table of returns and probabilities above, to determine the expected return on Barbara’s investment? (Round answer to 3 decimal places, e.g. 0.076.).

Expected return??????????????

b)Use the table of returns and probabilities above, to determine the standard deviation of the return on Barbara's investment? (Round intermediate calculations and final answer to 5 decimal places, e.g. 0.07680.)

Standard deviation????????????