22. Given the historical information in book, which of the following investment
ID: 2804523 • Letter: 2
Question
22. Given the historical information in book, which of the following investment classes had the lowest variability in returns? a Small U.S. Stocks b. Short-Term Govenmen Bonds c. Large U.S. Stocks d. Long-Tem Governument Bonds Answer 23. The present value of an ordinary suity formula assumes that a cash flows are adjusted for inflation b cash flows occur at the end of each period c. cash flows occur at random d cash flows occur at the begineing of each period Answer 24. Gimli wants to double the namber of gold pieces he has. He has made an agreement wih Smaug to earn 7% each year compoundedmmally Hestared with S10000 and-mil- how long it will take for his investment to double so $20,000 a. 4.96 ycars b. Error 5- the answer cannot be computed with the infoemation given. e. -10 ycars d. 10.24 years e. 2.5 years 25. Crookshanks has tinally built a better mousetrap and everyone agrees they should be able to grow dividends at 3% per year for the foreseeable future. If the Current price of the ompany Answer:- hare, what must be the stock is S40 per share and the company just paid a dividend of S3 per s required rate of return expectation in the marketplace? a, 8.0% b. 8.15% c. 10.0% d. 10.73% Answer:Explanation / Answer
22. Short term government bonds have lowest variability of returns as compared to long term bonds as they are more volatile which causes variability of cash flows in them.
23.Present value of annuity assumes that the cash flows occur at the end of each period. Hence the correct answer is b.
24. -10000 PV, 20000FV, 7 I/Y, CPT N
N= 11.42 years. The correct option is b.
25. Re= D1/ P0+ g
D1= 3×1.03= 3.09
Re= 3.09/40+0.03= 0.10725= 10.73%
The correct option is D.
19. -100 % return means stock worth today $ 0.
Return = 0-40/40*100= -100% hence the correct option is D.
20. Those bond whose market required return ( ytm) is greater than coupan rate are trading at discount. Hence the correct option is b.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.