1. Brande Co. borrows $1,300,000 and will pay it back in four equal installments over the year (every month). The interest on this loan is $100,000 which will also be paid back in four equal installments. The effective interest rate on this loan is:

A. 12.20%

B. 3.05%

C. 12.77%

D. 7.69%

E. 13.21%

2. The components of an interest rate are composed of:

a. Real rate of return, Inflation Premium and Risk Premium

b. U.S. Treasury rate, Inflation and Risk Premium

c. Prime rate and LIBOR

d. Cost of Capital, Net Present Value and IRR

3. The current rate on a US Treasury (risk-free) is 2.5% and the expected return of the stock market (market return) is 9%. The company has a beta of 1.2. Based on the information the return necessary to satisfy a common shareholder using the Capital Asset Pricing Model would be:

A. 13.30%

B. 10.30%

C. 10.80%

D. 9.00%