Mid Term Securities Analysis

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Grading Summary
These are the automatically computed results of your exam. Grades for essay questions, and comments from your instructor, are in the "Details" section below. | Date Taken: | 5/25/2012| Time Spent:| 2 h , 45 secs |

Points Received:| 161 / 210 (76.7%) |
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Question Type:| # Of Questions:| # Correct:|
Multiple Choice| 8| 7|
Essay| 5| N/A|
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Grade Details|

1.| Question :| (TCO D) Find the current dividend on a stock, given that the required return is 8 percent, the dividend growth rate is 5 percent, and the stock price is $50 per share.|
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| Student Answer:| $1.75 |
| | $2.00 |
| | $1.25 |
| | $1.43 |
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2.| Question :| (TCO D) Find the next dividend on a stock given that the required return is 9.78 percent, the dividend growth rate is 7.77 percent, and the stock price is $94.89 per share.|
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| Student Answer:| $2.91 |
| | $0.91 |
| | $1.91 |
| | $1.71 |
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3.| Question :| (TCO D) A company has current assets of: cash $500, accounts receivable $200, and inventory $400. The company also has current liabilities of: accounts payable $300 and notes payable $600. What is the company's quick ratio?|

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| Student Answer:| .78 |
| | .88 |
| | .90 |
| | .55 |
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4.| Question :| (TCO B) Behavioralists point out that even if market prices are ____________ there may be _______________.|
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| Student Answer:| distorted; limited arbitrage opportunities | | | distorted; fundamental efficiency |
| | allocationally efficient; limitless arbitrage opportunities | | | distorted; allocational efficiency |
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5.| Question :| (TCO B) The ratio of the average yield on 10 top-rated corporate bonds, to the average yield on 10 intermediate-grade bonds is called the __________.|
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| Student Answer:| bond price index |
| | confidence index |
| | relative strength index |
| | trin ratio |
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6.| Question :| (TCO A) ____ is not a derivative security.|
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| Student Answer:| A share of common stock |
| | A call option |
| | A futures contract |
| | All of the above are derivative securities. |
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7.| Question :| (TCO A) The maximum maturity on commercial paper is|
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| Student Answer:| 270 days |
| | 180 days |
| | 90 days |
| | 30 days |
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8.| Question :| (TCO A) You can tax shelter only one-half of your retirement savings. You want to invest one-half of your savings in bonds and one-half in stocks. How much of the bonds and how much of the stocks should you allocate to the tax sheltered investment?|

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| Student Answer:| Stock and bond investments should be equally invested in both tax sheltered and non-sheltered accounts. | | | You should place all the stocks in tax sheltered accounts and all the bonds in non-sheltered accounts. | | | You should place all the bonds in tax sheltered accounts, and all the stocks in non-sheltered accounts. | | | It makes no difference how you allocate your stock and bond investments among tax sheltered and non-sheltered accounts. | |

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9.| Question :| (TCO I) CAPM is one of the more popular models for determining the risk premium on a stock. If the Expected Return on the Stock is 20.38 percent, the Risk-Free Rate is 9.0 percent, and the Beta for Stock i is 1.75. Find the Expected Return on the market using the CAPM model. Show your work.|

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| Student Answer:| | rs=rRF+(RPm)b .2038=.09+(RPm)*1.75 .2038-.09/1.75=(RPm) .0650=RPm The Expected Return on the market using the CAPM model is 6.50% | |
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| Comments:| (20.38-9)/1.75 + 9 = 15.5% Chapter 7...
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