ADMS3530_FinalExam_S1_2007_June07_VersA_Solutions

ADMS3530_FinalExam_S - Name Section ID Professor Bert Kohen B(Tuesdays/Thursdays 4-7 pm and Professor Tissenbaums Sections D(Tuesdays/Thursdays

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Name Section ID # Professor Bert Kohen B (Tuesdays/Thursdays, 4-7 pm), and Professor Tissenbaum’s Sections D (Tuesdays/Thursdays, 7-10 pm) AK/ADMS 3530.03 Finance Final Exam Summer S1 2007 June 20, 7-10pm Type A Exam This exam consists of 50 multiple choice questions and carries a total of 100 points . Choose the response which best answers each question. Circle your answer below , and fill in your answers on the bubble sheet . Only the bubble sheet is used to determine your exam score . Please do not forget to write your name and ID # at the top of this cover page and on the bubble sheet. Also please write the type of your exam (A or B) on the bubble sheet. Please note the following points : 1) Read the questions carefully and use your time efficiently . 2) Choose the answers that are closest to yours, because of possible rounding. 3) Keep at least 2 decimal places in your calculations and final answers. 4) Each question is worth 2 points. 5) Unless otherwise stated, interest rates are annual , and bonds have a face value (or par value) of $1,000 . 6) You may use the back of the exam paper as your scrap paper. Page 1
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1. What is the standard deviation of a portfolio's returns if the mean return is 15 percent, the variance of returns is 184, and there are three stocks in the portfolio? A) 7.83 percent B) 13.56 percent C) 41.00 percent D) 225.00 percent Ans: B Response: standard deviation = VAR = 184 = 13.56% 2. When a project's internal rate of return equals its opportunity cost of capital, then: A) the project should be rejected. B) the project has no cash inflows. C) the net present value will be positive. D) the net present value will be zero. Ans: D 3. What dividend is paid on preferred stock if investors require a 9 percent rate of return and the stock has a market value of $54.00 per share and a book value of $50.00 per share? A) $2.92 B) $4.50 C) $4.68 D) $4.86 Ans: D Response: 9% = Dividend/Price 9% = 4.86/54.00
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4. common stock is held for two years, during which time it receives an annual dividend of $10. The stock was sold for $100 and generated an average annual return of 16 percent. What price was paid for the stock? A) $61.60 B) $64.80 C) $88.00 D) $90.90 Ans: D Response: .32 = P 20 P 100 + - .32P = 120 – P P = $90.91 5. What is the most likely value of the PVGO for a stock with current price of $50, expected earnings of $6 per share, and a required return of 20 percent? A) $10 B) $20 C) $25 D) $30 Ans: B Response: With 100 percent payout ratio, the stock would be valued at $30 ($6/.2 = $30). Thus, the $20 of additional price must represent PVGO 6. What percentage change in sales occurs if profits increase by 3 percent when the firm's degree of operating leverage is 4.5? A)
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This note was uploaded on 04/11/2011 for the course ADMS 3530 taught by Professor Unknown during the Spring '09 term at York University.

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ADMS3530_FinalExam_S - Name Section ID Professor Bert Kohen B(Tuesdays/Thursdays 4-7 pm and Professor Tissenbaums Sections D(Tuesdays/Thursdays

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