Finance : Suppose 1-year T-bills currently yield 8.00% and the

Finance : Suppose 1-year T-bills currently yield 8.00% and the future inflation

Subject: Business    / Finance
Question

Suppose 1-year T-bills currently yield 8.00% and the future inflation rate is expected to be constant at 3.20% per year. What is the real risk-free rate of return, r*? Disregard any cross-product terms, i.e., if averaging is required, use the arithmetic average.

4.80%

3.20%

8.00%

5.80%

11.20%

2.5 points

QUESTION 15

Zigma Enterprises’ stock just paid $1 in dividend (D0) per share. The dividend is projected to DECREASE at a constant rate of 5% each year in the future. The required rate of return on the stock is 15%. What is one share of this stock worth?

$2.45

$6.42

$4.75

$7.31

$3.30

2.5 points

QUESTION 16

The Samson Company just paid $1.5 in dividend (D0) per share, and that dividend is expected to grow at a constant rate of 6 % per year in the future. The required rate of return on the stock is 13%. What is the company’s current stock price?

$20.41

$21.26

$25.27

$24.38

$22.71

Assume the risk-free rate is 5% and that the risk premium on the market is 5%. If a stock has a required rate of return of 9.0%, what is its beta?

0.90

1.00

0.40

1.13

0.80

2.5 points

QUESTION 20

Mason’s Flower shop is considering a project with the following cash flows. What is the IRR of this project?

15.18%

15.58%

16.58%

14.08%

15.98%

2.5 points

QUESTION 21

GAMA Corp is considering a project that will produce cash inflows of $6,000 a year for 2 years with a final cash inflow of $12,000 in year 3. The project’s initial cost is $18,500. What is the net present value of this project if the required rate of return is 10 percent?

929.00

1,167.54

427.56

-1,083.34

1,052.67