Question $4$: If a project's NPV is negative, its IRR will be: $($a$)$ Greater than the project's required return.

$($b$)$ Equal to the project's required return.

$($c$)$ Less than the project's required return.

$($d$)$ None of the above.

$($e$)$ Positive, so it$$s a bad idea.

Question $5$: The internal rate of return $($IRR$)$ is greater than the required rate of return when:

$($a$)$ Buying an under$-$priced asset.

$($b$)$ Selling an under$-$priced asset.

$($c$)$ Buying a fairly$-$priced asset.

$($d$)$ Selling a fairly$-$priced asset.

$($e$)$ Buying an over$-$priced asset.

Question $6$: A stock has a beta of $2.$ Its next dividend is expected to be $$100,$ paid one year from now.

Dividends are expected to be paid annually and grow by $3\%$ pa forever.

Treasury bonds yield $4\%$ pa and the market risk premium $($MRP$)$ is $6\%$ pa$.$ All returns are effective annual rates.

What is the price of the stock now?

$($a$)$ $$625$

$($b$)$ $$769\mathrm{.}23$

$($c$)$ $$1,428\mathrm{.}57$

$($d$)$ $$2,000$

$($e$)$ $$2,500$

Question $7$: A house worth $$2,000,000$ is expected to earn $$90,000$ gross rent revenue and incur rental costs of $$30,000$ over the next year. Assume that these cash flows are expected one year from now, so they$$re received and paid annually in arrears. If the gross rent revenue and costs increase by $2\%$ pa and houses can be valued as a perpetuity, what is the internal rate of return $($IRR$)$ of this house asset? Ignore taxes.

$($a$)8\%$ pa $($b$)7\%$ pa $($c$)6\%$ pa $($d$)5\%$ pa $($e$)4\%$ pa