Since there are no tax consequences arising from trades in a 401(k) plan, it makes sense A) to trade often in an attempt to time the markets. B) to ignore this feature and stick to a sound investment approach. C) not to participate in the plan since you can’t write off tax losses. D) to […]
Date: September 19th, 2020
The Price-Earnings valuation model estimates the price of a share of stock today as the: A) sum of a forward looking P/E multiple and the EPS in the next period. B) product of the firm’s historic P/E multiple and the EPS in the next period. C) product of a forward looking P/E multiple and the […]
Date: September 19th, 2020
The minimum rate of return necessary to attract an investor to purchase or hold a security is referred to as the A) investor’s required rate of return. B) risk-free rate. C) stock’s beta. D) investor’s risk premium. ANSWER A
Date: September 19th, 2020
A Roth IRA is likely to be preferred over a traditional tax deductible IRA if A) your marginal tax rate is expected to be less in your retirement years. B) your marginal tax rate is expected to be the same in your retirement years as in your pre-retirement years. C) your marginal tax rate is […]
Date: September 19th, 2020
The return on the market portfolio is currently 12%. Mobile Phone Corporation stockholders require a rate of return of 30% and the stock has a beta of 3.2. According to CAPM, determine the risk-free rate. A) 4.64% B) 6.50% C) 3.82% D) 9.80% ANSWER C
Date: September 19th, 2020
If Cathy deposits $12,000 into a bank account that pays 6% interest compounded quarterly, what will the account balance be in seven years? A) 19,112 B) 19,344 C) 18,207 D) 18,001 ANSWER C
Date: September 19th, 2020
Bronson Building Products Inc estimates that FCFF in the coming year will be $1,600,000, year two will be 15% greater than year one, and year three will be 10% greater than year two. Bronson has a cost of capital of 12%. Estimate the firm’s terminal value FCFF as of year three if cash flows are […]
Date: September 19th, 2020
The interest rate used to discount bond cash flows to determine the bond price is known as the: A) coupon rate. B) yield to maturity. C) compound rate. D) coupon yield. ANSWER B
Date: September 19th, 2020
Zero coupon bonds have which of the following features? A) annual interest payments B) semi-annual interest payments C) no interest payments D) Any of the above may apply. ANSWER C
Date: September 19th, 2020
Complete Table 13-1 by filling in each of the missing values (there are 18 total missing values). What will be an ideal response? ANSWER Explanation:
Date: September 19th, 2020
