Question 1(10 points)

The annual return on the S&P 500 Index was 18.1%. The annual T-bill yield during the same period was 6.2%. What was the market risk premium during that year?

Question 1 options:

6.2 %

11.9 %

18.1 %

24.3 %

Question 2(10 points)

An investor owns $2,000 of ABC stock, $4,000 of DEF stock, and $6,000 of GHI stock. What are the portfolio weights of each stock?

Question 2 options:

ABC stock = 0.3333, DEF = 0.1667, GHI = 0.5

ABC stock = 0.3333, DEF = 0.3333, GHI = 0.3333

ABC stock = 0.2, DEF = 0.4, GHI = 0.6

ABC stock = 0.1667, DEF = 0.3333, GHI = 0.5

Question 3(10 points)

Question 3 options:

A Treasury bond that you own at the beginning of the year is worth $1,055. During the year, it pays $35 in interest payments and ends the year valued at $1,065.Your dollar return was ________ and your percent return was _______.

Question 4(10 points)

The annual return on the S&P 500 Index was 12.4 percent. The annual T-bill yield during the same period was 5.7 percent. What was the market risk premium during that year?

Question 4 options:

5.7 %

6.7 %

12.4 %

18.1 %

Question 5(10 points)

Question 5 options:

ABC Corp stock ended the previous year at $23.36 per share. It paid a $2.37 per share dividend last year. It ended last year at $18.89. If you owned 500 shares of ABC, your dollar return was ________ and your percent return was _______.

Question 6(10 points)

The market portfolio would have a beta of:

Question 6 options:

0

1

-1

0.08

Question 7(10 points)

Question 7 options:

A corporate bond that you own at the beginning of the year is worth $975. During the year, it pays $35 in interest payments and ends the year valued at $965. What was your dollar return and percent return?

Question 8(10 points)

Which one of the following is not considered to be a generally recognized type of market efficiency?

Question 8 options:

strong-form

semi-strong form

weak-form

insider-information form

Question 9(10 points)

If the risk-free rate is 8 percent and the market risk premium is 2 percent, what is the required return for the market?

Question 9 options:

2 %

6 %

8 %

10 %

Question 10(10 points)

Smith Inc. has a dividend yield equal to 5 percent and is expected to grow at a 12 percent rate for the next seven years. What is Smith's required return?

Question 10 options:

17.0 %

7.0 %

6.7 %

2.4 %