13. Terroni Enterprises has a beta of 1.10, the real risk-free rate is 2.00%, in

Question

13. Terroni Enterprises has a beta of 1.10, the real risk-free rate is 2.00%, investors expect a 3.00% future inflation rate, and the market risk premium is 4.70%. What is Scheuer's required rate of return?

a)       9.43 %

b)       9.67%

c)       9.92%

d)       10.17%

e)       10.42%

14. What is the PV of an annuity due with 5 payments of $2,500 at an interest rate of 5.5%?

a)       11,262.88

b)       11,826.02

c)       12,417.32

d)       13,038.19

e)       13,690.10

15. FOX stock has a beta of 1.30, and its required return is 12.00%. LAP Stock's beta is 0.80. If the risk-free rate is 4.75%, what is the required rate of return on LAP Beta's stock? (Hint: First find the market risk premium.)

a)       8.76%

b)       8.98%

c)       9.21%

d)       9.44%

e)       9.68%

16. Direct Markets stock had a required return of 11.75% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Then an increase in investor risk aversion caused the market risk premium to rise by 2%. The risk-free rate and the firm's beta remain unchanged. What is the company's new required rate of return? (Hint: First calculate the beta, then find the required return.)

a)       14.38%

b)       14.74%

c)       15.11%

d)       15.49%

e)       15.87%

17. Amber borrowed $12,000 at a rate of 9.0% and must repay it in 4 equal installments at the end of each of the next 4 years. How large would the payments be?

a)       3704.02

b)       3.889

c)       4,083.69

d)       4,287.87

e)       4,502.26

Explanation / Answer

14. What is the PV of an annuity due with 5 payments of $2,500 at an interest rate of 5.5%?

a)11,262.88--------------CORRECT ANSWER-100% SURE

b)11,826.02

c)12,417.32

d)13,038.19

e)13,690.10

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