Finance 301_Quiz4.pdf

# Finance 301_Quiz4.pdf - Quiz 4 Fall 2016 1/7 1 Given the...

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10/31/2016 Quiz 4 - Fall 2016 1/7 1. Given the following information, calculate Fund PSU’s alpha: T­Bill Return: 2% S&P 500 Return: 8% Beta: 0.75 Beginning Fund Value: \$15 Ending Fund Value: \$18 A) 13.5% B) ­5.0% C) ­13.5% D) 4.0% E) 5.0% 2. Given the following information, calculate the firm’s beta: Expected Return: 8% Risk Free Rate: 3% Market Return: 7% Market Risk Premium: 4% 3. An investor will receive a 12­year annuity of \$3,000 per year. If the annual interest rate is 6.0%, what is the present value of this annuity? 4. Elliot makes a payment of \$3,500 a year on her car. At the end of 10 years, she’s paid off her initial \$25,000 loan. What was her approximate interest rate? Submitted by Chen, Yijia (YVC5416) on 10/31/2016 9:37:41 PM Points Awarded 120.00 Points Missed 5.00 Percentage 96.0% Points Earned: 5.0 Points Earned: 5.0 Points Earned: 5.0

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10/31/2016 Quiz 4 - Fall 2016 2/7 D) 7.5% E) 4.0% 5. Your friend wants to borrow \$4,500 from you and gives you three options for repayment. Assuming a discount rate of 4%, which of the following options should you choose? Option A: \$5,500 lump sum paid 4 years from now Option B: \$4,500 lump sum paid 3 years from now Option C: \$475 a year for the next 10 years A) Option C because it is the highest net present value B) Option A because it is the highest net present value C) You should not lend the money because all options are negative NPV investments D) You are indifferent because they all have the same net present value E) Option B because it is the highest net present value
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