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RIVESexam2PracticeQuestions

# RIVESexam2PracticeQuestions - Business Finance 620 Exam 2...

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1 Business Finance 620 Exam 2 Practice Questions 30 Chapter 11 Review How much should you be willing to pay for a share of stock with a dividend yield of 5.5%, a 13.7% required return, and an expected price one year from today of \$40? A. \$33.42 B. \$36.97 C. \$40.25 D. \$35.18 31

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2 Chapter 11 Review You deposit \$20,000 into a savings account that earns 6.6% APR, compounded monthly. If inflation averages 3% a year for the next twenty years, and you make no further deposits or withdrawals during this period, how much of the account’s nominal FV at the end of twenty years will be required to cover the cost of inflation? A. \$29,435 B. \$36,122 C. \$40,569 D. \$33,294 32 Chapter 11 Review You own a 15-stock portfolio with a 10% return and 17% standard deviation. Which of the following stocks would standard deviation. Which of the following stocks would be the best addition to your portfolio? A. Stock A, with a 7% return, 21% standard deviation, and (0.65) correlation coefficient with your portfolio B. Stock B, with a 12% return, 15% standard deviation, and 0.78 correlation coefficient with your portfolio C Stock C with a 9% return 6% standard deviation C. Stock C, with a 9% return, 6% standard deviation, and (0.36) correlation coefficient with your portfolio D. Stock D, with a 13% return, 12% standard deviation, and 0.63 correlation coefficient with your portfolio 33