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# Finance Questions

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References

WorksheetSection: 8.1 Bonds and Bond Valuation

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WorksheetSection: 8.1 Bonds and Bond Valuation

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WorksheetSection: 9.2 Estimates of Parameters in the Dividend Discount Model

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WorksheetSection: 9.2 Estimates of Parameters in the Dividend Discount Model

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WorksheetSection: 9.2 Estimates of Parameters in the Dividend Discount Model

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Zoom stock has a beta of 1.46. The risk-free rate of return is 3.07 percent and the market rate of return is 11.81 percent. What is the amount of the risk premium on Zoom stock?

8.09%

12.76%

9.59%

10.25%

17.24%

References

Multiple ChoiceSection: 11.9 Relationship between Risk and Expected Return (CAPM)

8.

The risk premium for an individual security is computed by:

multiplying the security's beta by the market risk premium.

multiplying the security's beta by the risk-free rate of return.

adding the risk-free rate to the security's expected return.

dividing the market risk premium by the quantity (1 + Beta).

dividing the market risk premium by the beta of the security.

References

Multiple ChoiceSection: 11.9 Relationship between Risk and Expected Return (CAPM)

9.

The risk-free rate of return is 3.68 percent and the market risk premium is 7.84 percent. What is the expected rate of return on a stock with a beta of 1.32?

9.17%

9.24%

13.12%

14.03%

14.36%

E(r) = .0368 + (1.32 ×.0784) = .1403, or 14.03%

References

Multiple ChoiceSection: 11.9 Relationship between Risk and Expected Return (CAPM)

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WorksheetSection: 13.08 The Weighted Average Cost of Capital

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WorksheetSection: 13.11 Flotation Costs and the Weighted Average Cost of Capital

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WorksheetSection: 13.08 The Weighted Average Cost of Capital

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References

WorksheetSection: 13.08 The Weighted Average Cost of Capital