FINC2012_MidtermExam_Sample - FINC2012 Multiple Choice...

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FINC2012 Multiple Choice Sample Questions (Semester 1, 2015) Page 1 of 3 Note: This sample test should only be used as a guide to the styles of mid-semester exam questions. The topics covered here are not exhaustive. Your revision should not be based on these set of questions only. The level of difficulty of this sample test is also NOT indicative of the level of difficulty of the actual test. The answers are in bold . 1. If the average annual rate of return for common stocks is 11.7%, and treasury bills is 4.1%, what is the average market risk premium? A) 15.8% B) 4.1% C) 7.6% D) None of the above 2.You are thinking about investing in a mine that will produce $10,000 worth of ore in the first year. As the ore closest to the surface is removed it will become more difficult to extract the ore. Therefore, the value of the ore that you mine will decline at a rate of 8% per year forever. If the appropriate interest rate is 6%, then the value of this mining operation is closest to:
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