QUESTION 30

1. A decrease in a firm's expected growth rate would normally cause its required rate of return to

		increase.
		decrease.
		remain constant.
		possibly increase, possibly decrease, or possibly have no effect.

EXERCISES

QUESTION 31

1. A stock has the following probability distribution: If the economy is good (the probability is 20%), its expected stock return is 20%; if the economy is on average (the probability is 60%), its expected stock return is 10%; if the economy is bad (the probability is 20%), its expected return is -10%. Find the expected rate of return for the stock.

		8.0%
		6.0%
		10.0%
		14.0%

5 points

QUESTION 32

1. Using the data from Question 31, find the standard deviation for the stock.

		9.80%
		10.29%
		11.35%
		12.98%

5 points

QUESTION 33

1. Find the yield to maturity (YTM) for a 15-year, 8% annual coupon rate, and $1,000 par value bond if the bond sells for $1,208 currently? We assume that interest is paid on this bond semiannually.

		5.89%
		6.84%
		7.55%
		8.72%

QUESTION 34

1. Using the information from Question 33, calculate the bond's current yield.

		6.35%
		6.62%
		7.22%
		7.08%

QUESTION 35

1. Using the information from Question 33 and 34, calculate the bond's capital gain yield.

		-0.39%
		-0.56%
		-0.73%
		1.18%