Q4version1-1(1) - MGT 3062 FINANCIAL MANAGEMENT SPRING 2011 QUIZ 4 Student ID Choose the BEST answer to each question Bubble in your answer on the

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MGT 3062 FINANCIAL MANAGEMENT SPRING 2011 QUIZ 4 Student: ____________________________________________________ ID: ______________________ Choose the BEST answer to each question. Bubble in your answer on the form provided. If you feel the answer is not provided, show your work, explain your assumptions, and write your answer on the scantron after the letter E. Remove all hats and dark glasses. If you have to go to the restroom, go now. No electronic devices besides a calculator are allowed. You may not use your cell phone as a calculator. As a courtesy to your classmates, no questions are allowed after the initial instructions are given. Write your name on your scantron now. Ethics Challenge: I certify by my signature that: the work on this exam is my own without any outside assistance, that I did not provide assistance to another classmate, that I used no electronic devices for information storage, retrieval, or communications, that I have abided by the Georgia Tech honor code in the preparation and execution of this exam. I further understand that my professor will do everything within his power to expel me from Georgia Tech if I am found in violation of the Georgia Tech honor code. Signature:____________________________________________________________________________ 1. According to modern portfolio theory, which one of the following statements is correct? A. The lower the volatility of returns, the greater the risk premium. B. The greater the volatility of returns, the greater the risk premium. C. The risk premium is unrelated to the average rate of return. D. The lower the average return, the greater the risk premium. E. The risk premium is not affected by the volatility of returns. 2. Mullineaux Corporation has a target capital structure of 41 percent common stock, 4 percent preferred stock, and 55 percent debt. Its cost of equity is 19 percent, the cost of preferred stock is 6.5 percent, and the pre-tax cost of debt is 7.5 percent. What is the firm's WACC given a tax rate of 34 percent? A. 13.38 percent B. 15.17 percent C. 9.87 percent D. 10.77 percent E. 10.43 percent 3. The risk-free rate of return is 3.9 percent and the market risk premium is 6.2 percent. What is the expected rate of return on a stock with a beta of 1.21? A. 11.40 percent B. 10.92 percent C. 12.79 percent D. 12.22 percent E. 12.47 percent THE BUSINESS SCHOOL AT GEORGIA TECH Barry Marchman, Ph.D. Room 413 (404) 894-5110
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4. The systematic risk of the market is measured by: A. a beta of 0.0. B. a standard deviation of 1.0.
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This note was uploaded on 02/09/2012 for the course MGT 3078 taught by Professor Marchman during the Spring '12 term at Georgia Institute of Technology.

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Q4version1-1(1) - MGT 3062 FINANCIAL MANAGEMENT SPRING 2011 QUIZ 4 Student ID Choose the BEST answer to each question Bubble in your answer on the

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