QUESTION 1

1. At 5 percent compounded monthly, how long will it take to triple your money?

• 221 months
• 264 months
• 302 months
• 248 months

1.5 points

QUESTION 2

1. You have just purchased a share of preferred stock for 500.00 SAR. The preferred stock pays an annual dividend of 55 SAR per share forever. What is the rate of return on your investment?

• 0.055
• 0.010
• 0.110
• 0.220

1.5 points

QUESTION 3

1. Stock X has the following returns for various states of the economy:

State of the Economy Probability Stock A's Return

Recession 20% -30%

Below Average 15% -2%

Average 30% 10%

Above Average 15% 18%

Boom 20% 40%

1. Stock X's expected rate of return is ________.

• 6.4%
• 7.2%
• 7.4%
• 9.6%

1.5 points

QUESTION 4

1. You decide to borrow 750,000 SAR to build a new home. The bank charges an interest rate of 6% compounded monthly. If you pay back the loan over 20 years, what will your monthly payments be?

• 5,123.64 SAR
• 5,237.45 SAR
• 5,687.75 SAR
• 5,373.23 SAR

1.5 points

QUESTION 5

1. You wish to accumulate 1,000,000 SAR by depositing 5,000 SAR per month into a savings account that earns 3.75% compounded monthly. How many months will it take?

• 156
• 154
• 153
• 152

1.5 points

QUESTION 6

1. Tim has 1000 SAR in a bank account paying 2% interest per year. At the end of 5 years, your bank account balance will be 1.100 SAR if interest is not compounded, but will be greater than 1.100 if interest is compounded.
2. True
3. False

1.5 points

QUESTION 7

1. Assume that you have 150,000 SAR invested in a stock that is returning 14%, 250,000 SAR invested in a stock that is returning 18%, and 300,000 SAR invested in a stock that is returning 15%. What is the expected return of your portfolio?

• 13.25%
• 14.97%
• 15.67%
• 15.87%

1.5 points

QUESTION 8

You must add one of two investments to an already well- diversified portfolio:

Security A Security B

Expected Return = 14% Expected Return = 14%

Standard Deviation of Standard Deviation of

Returns = 19.7% Returns = 19.7%

Beta = 1.5 Beta = 1.8

1. If you are a risk-averse investor, which investment is the better choice?

• Security A
• Security B
• Either security would be acceptable
• Cannot be determined with information given

1.5 points

QUESTION 9

1. Stock A has the following returns for various states of the economy:

State of the Economy Probability Stock A's Return

Recession 5%- 30%

Below Average 20% -2%

Average 45% 10%

Above Average 20% 18%

Boom 10% 40%

1. Stock A's standard deviation of returns is ________.

• 13.54%
• 14.54%
• 17.36%
• 20.05%

1.5 points

QUESTION 10

1. A firm has a beta of 1.5 and a standard deviation of returns of 10%. The return on the market portfolio is 15% and the risk-free rate is 4%. According to CAPM, what is the required rate of return on the firm's stock?

• 14%
• 12%
• 13%
• 15%