35. DEF Inc will pay a dividend of $1.00 per share tomorrow. This dividend will increaseby 100% the next year, thereafter the dividend will increase by 5% per year in perpetuity. If investors require a 10% rate of return what is the price of the stock today?a)$10.50b) $41.00c)$40.00d)$21.00e)none of the aboveUse the information in the table below to answer the next two questions:ProbabilityEquity FundBond Fund30%-15%12%50%10%5%20%35%-10%36. What is the expected return on the equity fund?37. What is the standard deviation of returns for the equity fund?11

CFIN300: Final Exam: Spring 2006 Version #438. Stock A has an expected return of 10% and a standard deviation of 20%. Stock B has an expected return of 15% and a standard deviation of 25. The correlation between the two stocks is 0.8. If you invested 25% of your wealth in Stock A and 75% in Stock B what would be the standard deviation of this portfolio?39. A firm has total assets of $2.5 million and spontaneously increasing liabilities of $1 million. The firm’s total sales for the year just ended were $4 million and the firm’s manager expects sales to grow 20% next year. The firm has a net profit margin of 8%and consistently pays out 40% of its net income as dividends. Using the percentage of sales method, how much external financing will the firm require in the upcoming year?a)$69,600b)$108,000c)$146,400d)$200,000e)$800,00040. Agency costs refer to:41. What is the present value of $1,000,000 to be received in 3 months if the required return is 6% per year simple interest?12

CFIN300: Final Exam: Spring 2006 Version #442. Jamie wants to sell you an investment that will pay $42 every year forever, starting in 4 years. If you require a return of 9% per year compounded annually, what is the most that you will be willing to pay for this investment?43. Ralph A. Horse is making monthly mortgage payments of $1,500. He initially amortized the mortgage over 25 years. If the interest rate is 8% compounded semi-annually, what is the outstanding balance after 5 years?a)$181,081.24b)$197,826.35c)$450,000.00d)$1,396,729.18e)$1,405,889.20Use the information in the table below, about the shares of BMO, to answer the next question:AssetExpectedReturnStandardDeviationCorrelationsBMORisk-Free RateMarketBMO??15%1.000.000.70Risk-Free Rate5%0.0%1.000.00Market15%25%1.00

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