CHAPTER 1 APPENDIX
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Your expectations from a one year investment in Wang Computers is as follows:
Rate of Return
Chapter 19: Dividends and Other Payouts
19.1 The aftertax dividend is the pretax dividend times one minus the tax rate, so:
Aftertax dividend = $5.60(1 0.15) = $4.76
The stock price should drop by the aftertax dividend amount, or:
Ex-dividend price = $75
Chapter 12: An Alternative View of Risk and Return: The Arbitrage Pricing Theory
12.1 Since we have the expected return of the stock, the revised expected return can be determined using the
innovation, or surprise, in the risk factors. So, the revised exp
Chapter 2: Accounting Statements and Cash Flow
2.1. To find shareholders equity, we must construct a balance sheet as follows:
Net fixed assets
CHAPTER 7AN INTRODUCTION TO PORTFOLIO MANAGEMENT
1. A good portfolio is a collection of individually good assets.
2. Risk is defined as the uncertainty of future outcomes.
3. Prior to the work of Markowitz in the lat
CHAPTER 8AN INTRODUCTION TO ASSET PRICING MODELS
1. One of the assumptions of capital market theory is that investors can borrow or lend at the risk free
2. Since many of the assumptions made by the capital market theory are
CHAPTER 10ANALYSIS OF FINANCIAL STATEMENTS
1. Financial Accounting Standards Board (FASB) recognizes that it would be improper for all companies
to use identical and restrictive accounting principles.
2. The balance sheet shows wh
CHAPTER 9MULTIFACTOR MODELS OF RISK AND RETURN
1. Studies strongly suggest that the CAPM be abandoned and replaced with the APT.
2. The APT does not require a market portfolio.
3. Studies indicate that neither firm s
CHAPTER 6EFFICIENT CAPITAL MARKETS
1. Prices in efficient capital markets fully reflect all available information and rapidly adjust to new
2. An efficient market requires a large number of profit-maximizing investors
CHAPTER 5SECURITY-MARKET INDEXES
1. The general purpose of a market indicator series is to provide an overall indication of aggregate market
changes or movements.
2. An aggregate market index can be used as a benchmark to judge th
CHAPTER 2THE ASSET ALLOCATION DECISION
1. Experts suggest life insurance coverage should be seven to ten times an individual's annual salary.
2. Term life insurance provides both a death benefit and a savings plan.
CHAPTER 4ORGANIZATION AND FUNCTIONING OF SECURITIES
1. A market is a means through which buyers and sellers are brought together to aid in the transfer of
goods and/or services.
2. It is required by law that a stock market
CHAPTER 3SELECTING INVESTMENTS IN A GLOBAL MARKET
1. The U.S. equity and bond markets have grown in terms of their relative size of the world equity and
2. Diversification with foreign securities can help reduce portf
Chapter 3: Financial Planning and Growth
3.1 An increase of sales to $42,300 is an increase of:
Sales increase = ($42,300 $37,300) / $37,300
Sales increase = 0.1340, or 13.40%
Assuming costs and assets increase proportionally, the pro forma financial stat