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
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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
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