Section_1_A__solution

Section_1_A__solution - Lahore University of Management...

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Lahore University of Management Sciences FINN200 Intermediate Finance: Section 1 Farah Said Fall Semester 2010/11 20/09/2010 Quiz 2 Total Marks: 30 Roll Number: ___Solution____________ Total Time: 50 min 1. Dividend growth rate for a stable firm can be estimated as: A. Payout ratio x the return on equity B. Plow back rate - the return on equity C. Plow back rate/ return on equity D. Plow back rate x return on equity 2. A high proportion of the value a growth stock comes from: A. Past dividend payments B. Past earnings C. PVGO D. Both A and B 3. When stocks with the same expected return are combined into a portfolio, the expected return of the portfolio is: A. Less than the average expected return value of the stocks B. Greater than the average expected return of the stocks C. Equal to the average expected return of the stocks D. Impossible to predict 4. If a stock is overpriced it would plot: A. Above the security market line B. Above the capital allocation line C. Below the security market line D. On the security market line 5. Long term government bonds have: A. Default risk B. Market risk C. Interest risk D. None of the above 6. Which of the following statements is true? A. The coupon rate of a discount rate exceeds the bond’s YTM B. If the YTM is equal to the coupon rate, the bond will sell at a discount C. A premium bond has a YTM that exceeds the coupon rate
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D. A par value bond has a YTM that is less than the coupon rate E. A premium bond has a YTM that is less than the coupon rate 7. Clive Rodney Megabucks offers your friend, Melanie, an interesting gamble involving giving her the choice of the contents in one of two sealed, identical-looking boxes. One box has $20,000 in cash and the second has nothing inside. There is an equal probability that the chosen box contains cash versus nothing. Melanie states that she would not call
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This note was uploaded on 03/19/2012 for the course FINN 321 taught by Professor Farahsaid during the Spring '12 term at Alvin CC.

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Section_1_A__solution - Lahore University of Management...

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