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### Chapter 10 Questions V2

Course: FIN FIN/554, Summer 2006
School: Phoenix
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Expected Return, Variance, and Covariance 10.1 Ms. Sharp thinks that the distribution of rates of return on Q-mart stock is as follows: State of Economy Depression Recession Normal Boom a. b. Probability of State Occurring 0.1 0.2 0.5 0.2 Q-Mart Stock Return (%) -4.5 4.4 12.0 20.7 What is the expected return on the stock? What is the standard deviation of returns on the stock? 10.2 Suppose you have invested only...

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Phoenix - FIN - FIN/554
NPV and Capital Budgeting 7.1 Which of the following should be treated as incremental cash flows when computing the NPV of an investment? a. b. c. d. e. f. g. 7.2 A reduction in the sales of a companys other products caused by the investment An expen
Phoenix - FIN - FIN/554
The Payback Period Rule 6.1 Fuji Software, Inc., has the following mutually exclusive projects. Year 0 1 2 3 a. b. 6.2 Project A -\$7,500 4,000 3,500 1,500 Project B -\$5,000 2,500 1,200 3,000Suppose Fujis payback period cutoff is two years. Which of
Phoenix - FIN - FIN/554
How to Value Bonds 5.1 What is the present value of a 10-year, pure discount bond paying \$1,000 at maturity if the appropriate interest rate is: a. b. c. 5.2 5 percent? 10 percent? 15 percent?Microhard has issued a bond with the following character
Phoenix - FIN - FIN/554
Questions and ProblemsA.1The one-year spot rate is 10 percent and the two-year spot rate is 11 percent. a. What is the price of a two-year bond that pays an annual coupon of 6 percent? b. What is the yield to maturity of this bond?A. 2 A.3 A.4
Phoenix - FIN - FIN/554
Annual Compounding 4.1 Compute the future value of \$1,000 compounded annually for a. b. c. 10 years at five percent 10 years at seven percent 20 years at five percent Why is the interest earned in part (c) not twice the amount earned in part (a)?d.
Phoenix - FIN - FIN/554
Chapter 12: Risk, Return, and Capital Budgeting 12.1 The discount rate for the project is equal to the expected return for the security, RS, since the project has the same risk as the firm as a whole. Apply the CAPM to express the firms required retu
Phoenix - FIN - FIN/554
Chapter 9: Capital Market Theory: An Overview 9.1 a. The capital gain is the appreciation of the stock price. Because the stock price increased from \$37 per share to \$38 per share, you earned a capital gain of \$1 per share (=\$38 - \$37). Capital Gain
Phoenix - FIN - FIN/554
Chapter 30: Financial Distress30.1 Financial distress is often linked to insolvency. Stock-based insolvency occurs when a firm has a negative net worth. Flow-based insolvency occurs when operating cash flow is insufficient to meet current obligation
Phoenix - FIN - FIN/554
Chapter 26: Derivatives and Hedging Risk26.1 a. A forward contract is an arrangement calling for the future delivery of an asset at an agreedupon price. b. A futures contract obliges traders to purchase or sell an asset at an agreed-upon price on a
Phoenix - FIN - FIN/554
Chapter 25: Warrants and Convertibles25.1 a. A warrant is a security that gives its holder the right, but not the obligation, to buy shares of common stock directly from a company at a fixed price for a given period of time. Each warrant specifies t
Phoenix - FIN - FIN/554
Chapter 24: Options and Corporate Finance: Extensions and Applications24.1 a. The inputs to the Black-Scholes model are the current price of the underlying asset (S), the strike price of the option (K), the time to expiration of the option in fracti
Phoenix - FIN - FIN/554
Chapter 23: Options and Corporate Finance: Basic Concepts23.1 a. An option is a contract giving its owner the right to buy or sell an asset at a fixed price on or before a given date. b. Exercise is the act of buying or selling the underlying asset
Phoenix - FIN - FIN/554
Chapter 21: Leasing21.1 a. b. Leasing can reduce uncertainty regarding the resale value of the asset that is leased. Leasing does not provide 100% financing although it may look as though it does. Since firms must try to maintain their optimal debt
Phoenix - FIN - FIN/554
Chapter 19: Issuing Equity Securities to the Public 19.1 a. b. A general cash offer is a public issue of a security that is sold to all interested investors. A general cash offer is not restricted to current stockholders. A rights offer is an issuanc
Phoenix - FIN - FIN/554
Chapter 18: Dividend Policy: Why Does It Matter? 18.1 February 16: Declaration date - the board of directors declares a dividend payment that will be made on March 14. February 24: Ex-dividend date - the shares trade ex dividend on and after this dat
Phoenix - FIN - FIN/554
Chapter 20: Long-Term Debt 20.1 a. If you purchase the bond on March 1, you owe the seller two months of interest. The seller owned the bond for two months since the last interest payment date (January 1). She is entitled to the interest earned durin
Phoenix - FIN - FIN/554
Chapter 17: Valuation and Capital Budgeting for the Levered Firm 17.1 a. The maximum price that Hertz should be willing to pay for the fleet of cars with all-equity funding is the price that makes the NPV of the transaction equal to zero. NPV = -Purc
Phoenix - FIN - FIN/554
Chapter 16: Capital Structure: Limits to the Use of Debt 16.1 a. The value of a firms equity is the discounted expected cash flow to the firms stockholders. If there is a boom, Good Time will generate cash flow of \$250 million. Since Good Time owes i
Phoenix - FIN - FIN/554
Chapter 16 Appendix: The Miller Model and the Graduated Income Tax 16.17 a. According to the Miller Model, in equilibrium: rB (1 TC) = rS where rB = the pre-tax cost of debt (the interest rate) TC = the corporate tax rate rS = the required return on
Phoenix - FIN - FIN/554
Chapter 15: Capital Structure: Basic Concepts 15.1 a. Since Alpha Corporation is an all-equity firm, its value is equal to the market value of its outstanding shares. Alpha has 5,000 shares of common stock outstanding, worth \$20 per share. Therefore,
Phoenix - FIN - FIN/554
Chapter 13: Corporate-Financing Decisions and Efficient Capital Markets 13.1 a. b. Firms should accept financing proposals with positive net present values (NPVs). Firms can create valuable financing opportunities in three ways: Fool investors. A fir
Phoenix - FIN - FIN/554
Chapter 10: Return and Risk: The Capital Asset Pricing Model (CAPM) 10.1 a. Expected Return = (0.1)(-0.045) + (.2)(0.044) + (0.5)(0.12) + (0.2)(0.207) = 0.1057 = 10.57% The expected return on Q-marts stock is 10.57%.b.Variance (2) = (0.1)(-0.045
Phoenix - FIN - FIN/554
Chapter 7: Net Present Value and Capital Budgeting 7.1 Yes, the reduction in the sales of the companys other products, referred to as erosion, should be treated as an incremental cash flow. These lost sales are included because they are a cost (a rev
Phoenix - FIN - FIN/554
Chapter 6: Some Alternative Investment Rules 6.1 a. The payback period is the time that it takes for the cumulative undiscounted cash inflows to equal the initial investment. Project A: Cumulative Undiscounted Cash Flows Year 1 Cumulative Undiscounte
Phoenix - FIN - FIN/554
Chapter 5: How to Value Bonds and Stocks 5.1 The present value of any pure discount bond is its face value discounted back to the present. a. PV = F / (1+r)10 = \$1,000 / (1.05)10 = \$613.91 = \$1,000 / (1.10)10 = \$385.54 = \$1,000 / (1.15)10 = \$247.19
Phoenix - FIN - FIN/554
Appendix to Chapter 5 5A.1 a. The present value of any coupon bond is the present value of its coupon payments and face value. Match each cash flow with the appropriate spot rate. For the cash flow that occurs at the end of the first year, use the on
Phoenix - FIN - FIN/554
University of Pennsylvania The Wharton SchoolFNCE 100 PROBLEM SET #4 Fall Term 2005 A. Craig MacKinlayCapital Budgeting (Uncertainty) 1. Both Dow Chemical Company, a large natural gas user, and Superior Oil, a major natural gas producer, are think
Phoenix - FIN - FIN/554
University of Pennsylvania The Wharton SchoolFNCE 100 PROBLEM SET #3 Fall Term 2005 A. Craig MacKinlayDiversification, Risk and Return 1. We have three securities with the following possible payos. Probability of Outcome .10 .40 .40 .10 Return on
Phoenix - FIN - FIN/554
University of Pennsylvania The Wharton SchoolFNCE 100 PROBLEM SET #2 Fall Term 2005 A. Craig MacKinlayCapital Budgeting Under Certainty 1. (a) Plot the NPV as a function of the interest rate for the following sequences of cash ows: Sequence A Sequ
Phoenix - FIN - FIN/554
Chapter 4: Net Present Value 4.1 a. b. c. Future Value Future Value Future Value = C0 (1+r)T = \$1,000 (1.05)10 = \$1,628.89 = \$1,000 (1.07)10 = \$1,967.15 = \$1,000 (1.05)20 = \$2,653.30d.Because interest compounds on interest already earned, the int
Phoenix - FIN - FIN/554
University of Pennsylvania The Wharton SchoolFNCE 100 PROBLEM SET #1 Fall Term 2005 A. Craig MacKinlayPresent Value and Term Structure 1. Given an annual interest rate of 10 percent, what is the present (t = 0) value of a stream of \$100 annual pay
Phoenix - MATH - Math/116
MAT106 Chapters 7-8 Cumulative TestNAME: There are 20 questions for this test, and each question is worth 5 points. To show your work, use EE or MT and, where necessary, rewrite equations in slope-intercept form. If you provide only the answer and s
Phoenix - MATH - Math/116
Section 8.12x y 4 x 0 2(0) y 4 y (1) 4(1) y 4 (0, 4) y 0 2x 0 4 2x 4 2x 4 2 2 x 2 (2, 0) 2x y 6 x 0 2(0) y 6 y (1) 6( 1) y 6 (0, 6) y 0 2x 0 6 2x 6 2x 6 2 2 x 3 (3, 0)y8 6 4 2x-8 -6 -4 -2 -2 -4 -6 -8 2 4 6 8Since the l
Phoenix - MATH - 116
Week 7Test Point (0,0) y &gt;3 0 &gt; 3 False statementy8 6 4 2y&gt;3 Series 1 f(x)=0*x+3; R=NANx-8 -6 -4 -2 -2 -4 -6 -8 2 4 6 84 x y 4x 4 4 x y 4 4x x 4 y 4 4(4) 4 16 20 (4, 20) x 0 y 4 4(0) 40 4 (0, 4) x 4 y 4 4(4) 4 16 12 (4
Phoenix - MATH - Math/116
Week 53 8 (0,3), (3, ), (4, 0), ( ,1) 4 33 x 4 y 12 a )(0, ) 3(0) 4 y 12 4 y 12 4 y 12 4 4 y 3 (0,3) 3 b)(, ) 4 3 3 x 4( ) 12 4 3 x 3 12 3 x 3 3 12 3 3x 9 3x 9 33 x3 3 (3, ) 4 c)(, 0) 3 x 4(0) 12 3 x 12 3x 12 3 3 x4 (4, 0) 8 d
Phoenix - MATH - Math/116
Week 421x 28 16 x 40 1321x 28 16 x 5321x 28 16 x 28 16 x 53 16 x 285 x 255 x 25 5 5 x5 Check: 7(3(5) 4) 8(2(5) 5) 13 7(15 4) 8(10 5) 13 7(19) 8(15) 13 133 120 13 133 1332 x 6 3 x 15 3x 6 7 x 21 3 x 13
Phoenix - MATH - Math/116
Week 312 x 11x 6 6 11x 6 11xx6 Check: 12(6) 6 11(6)72 6 667 x 13 6 x 37 x 13 6 x 13 6 x 3 6 x 13x 16Check: 5( 16) 8 3(16) (16) 5 6(16) 3 80 8 48 16 5 96 3 -99 = -993 x 27 3 3 x 9 Check: 3(9) 2727 27
Phoenix - MATH - Math/116
Week 2mn mn 5y 3 x x3S 4000 (Expression)Kinetic Energy =12 mv 2(Not an expression)a) (6*5) + (6*4) = 30 + 24 = 54 b) (6*5) + (6*4) = 30 + 24 = 24 + 30 = 54 c) (6*5) + (6*4) = (5*6) + (4*6) = 30 + 24 = 54= \$780 (\$43.10 + \$36.80 + \$12
Phoenix - MATH - Math/116
= 2*3*3*5= 5 and 318120=8 11=7 15=17 33=19 30=7 30=28 11=62 miles 3=52 13 100 25= 1.6= 0.8%= 87.5%= 0.308\$35.3434) = 10 44) = 12(5 3) * 2 8(5 2) (5 3) * 2 8(5 2)=4+3=7
Phoenix - MATH - Math/116
MAT106 Week 2 Cumulative Test Chapters 0 and 1 NAME All work must be shown in either EE (required) or MathType (userfriendly option) to maximize points. Please make sure your final answer is clearly stated. Each question is worth 4 points. 1. List al
Phoenix - MATH - Math/116
MAT 106 Algebra 1A Week # 4 Chapter 2 Cumulative TestName All Multiple Choice questions are worth 1 point. Fill-in-the-blank questions are 3 points each. Short Answer questions are worth 4 points. You are required to show all of your work in the mul
Phoenix - MATH - Math/116
MAT 115 CH 5-7 TEST Directions: Complete all 20 questions. Type your answers in the answer sheet below. You do not have to show your work here, BUT YOU MUST SUBMIT YOUR ANSWERS IN THE ANSWER SHEET BELOW. ANSWER SHEET 1 B 2 A 3 D 4 B 5 C 6 B 7 B 8 350
Phoenix - MATH - Math/116
MAT 106 CHAPTERS 6 AND 7.1-7.3 TEST Name: To earn full credit on any question, you must show all your work using EE or MathType and have the correct solution. All questions carry equal weight to total 100 points. MULTIPLE CHOICE: 1. Which of the orde
Phoenix - MATH - Math/116
MAT106 FINAL EXAMPlease read these instructions carefully! 1. If you do not show your work in Equation Editor or MathType, you will earn no points. 2. Use Excel or Graph to plot lines and draw graphs. 3. Reduce all answers to lowest terms. 4. Write
Phoenix - MATH - Math/116
Number 1:Number 2:Number 3: NO solution (so type N) Number 4: 5/4 Number 5: 178.73 Number 6: 23 Number 7: E(t) = 0.5t + 63.8 E(10) = 68.8 Number 8:Number 9: (-3, 9) Number 10: 50 Number 11: NO Number 12: Yes Number 13: 5/7 Number 14: Y &gt; -6 Gra
Phoenix - MATH - Math/116
Axia College MaterialAppendix F Buying a HomeFor most people, buying a house is a great investment that can offer security in an uncertain world, but buying a house is also a commitment.Application PracticeAnswer the following questions. Use Equ
Phoenix - MATH - Math/116
Axia College MaterialAppendix E Fueling UpMotorists often complain about rising gas prices. Some motorists purchase fuel efficient vehicles and participate in trip reduction plans, such as carpooling and using alternative transportation. Other driv
Phoenix - MATH - Math/116
Axia College MaterialAppendix D Landscape DesignLandscape designers often use coordinate geometry and algebra as they help their clients. In many regions, landscape design is a growing field. With the increasing popularity of do-it-yourself televis
Phoenix - MATH - Math/116
Axia College MaterialAppendix C Starting a BusinessStarting your own business can be exciting and daunting at the same time. Businesses use math when managing finances, determining production levels, designing products and packaging, and monitoring
Phoenix - MATH - Math/116
Axia College MaterialAppendix B Using Equation Editor and MyMathLabEquation Editor, an application in Microsoft Word, allows you to type mathematical expressions and equations when using Word and other Microsoft applications. MyMathLab is a user-fr
Phoenix - MATH - Math/116
Axia College MaterialAppendix A Final Cumulative Test Overview and TimelineFinal Cumulative Test OverviewThe Final Cumulative Test on Ch. 1-3 &amp; 7-9, taken in Week Nine, covers the following topics: Ch. 1-3 Ch. 7-91. Real numbers and algebraic ex
Cornell - EAS - 122
Mexico City, Mexico has a very prominent historical record of earthquakes. One example is the 1985 earthquake which was one of the most devastating earthquakes in the history of America. On September 19th, 1985, Mexico City was struck with an 8.1 mag
Cornell - EAS - 1220
History of Damage Due to Wildfires or Flood Earthquakes damage is made up of shaking and ground rupture. Most damage occurs to buildings and other rigid structures. The severity of local damage depends on a combination of earthquake magnitude, distan
Cornell - EAS - 1220
Mexico City's history with severe weather is not particularly exciting. The city has seasonal tendencies as rainfall accumulations tend to become higher during the mid winter months. The primary problems associated with severe weather are hailstorms.
Cornell - DSOC - 1101
1. Mills, C. Wright, The Promise of Sociology, Chapter 2 in Adler &amp; Adler. Social context framing people and their actions is significant We sometimes overlook the role of larger historical and institutional factors affecting our situations, failin
Cornell - BIO G - 110
Clicker QuestionWhat do you think of the idea of enhancing the performance of athletes through gene doping? A) I am against it, as it is a step toward losing our humanity. We should appreciate the genes that each person was born with. B) I am agains
Cornell - BIO G - 110
Clicker QuestionAn erection results from:C)D) E) F) G)the release of nitric oxide (NO) near the arteries in the penis by the parasympathetic nervous system. NO-induced dilation of the arteries that bring blood into the penis. swelling of the co
Cornell - BIO G - 110
Clicker QuestionIn the developing embryo, the fallopian tubes, uterus and upper vagina develop from the A) ovaries. B) Wolffian ducts. C) Mullerian ducts. D) Freudian ducts. E) labioscrotal swelling.Where are we? I have been discussing reproducti
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Clicker QuestionAccording to eugenics, marriage is: C) a union of two lines of property-descent. D) an experiment in breeding. E) the climax of human courtship. F) a way of fixing a certain status. G) all of the above.Where are we? Last time I ta
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Clicker Question_ is the process in which RNA is synthesized and _ is the process in which protein is synthesized.C) D) E) F) G)Translation, transcription Translation, transfection Transcription, translation Transliteration, translation Transnucl
Cornell - BIO G - 110
Clicker Question_ is the process in which RNA is synthesized and _ is the process in which protein is synthesized.C) D) E) F) G)Translation, transcription Translation, transfection Transcription, translation Transliteration, translation Transnucl