W e real rate of return plus u expected inflation premium. B) a risk premium. C) both an inflation and a risk premium. D) the prevailing prime rate. Answer: greatest amount of risk? 24) Each of the following investments produces the same rate of return. Which one has the A) investment A with a standard deviation of 4% B) investment B with a standard deviation of 12% C) investment C with a standard deviation of 8% D) investment D with a standard deviation of 19% Answer: 25) The present value of $10,000 discounted at 5% per year and received at the end of 5 years A) $10,000/1.25. B) $10,000(1.05)5 -(C) $10,000/(1.05)5. D) $10,000 (1.05)1/5. Answer: A) spread. Blask price. C) bid price. D) broker price. Answer: 17) Assume the foreign exchange rate for the euro was U.S. $1.00 - 91 euro last month. This month, the exchange rate is U.S. $1.00 = .88 euro. All things equal, the dollar value of European stocks A) decreased. B) increased -C) stayed the same. D) would vary depending on the country. Answer: 18) Megan bought 200 shares of stock at a price of S10 a share. She used her 70% margin account to make the purchase. Megan sold her stock after a year for S12 a share. Ignoring margin interest and trading costs, what is Megan's return on investor's equity for this investment? A) 67% 200 ( 12-10) / 2008 10 /0.70x100 B) 29% e) 14% D) 10% X100 = 297. Answer: = (400/200) /0.70 X 100 = 0.20/0.70 19) Information that can be found on the Internet at no cost includes - I P/E ratios. II. recent news about a company. III. financial statements. IV. future earnings and stock prices. A) I and IV only B) II and III only C) I, II and III only D) I, II, III and IV Answer: 20) The Dow Jones Industrial Average (DJIA) is based on the prices of A) 30 stocks. B) 100 stocks. C) 500 stocks. D) 200 stocks. nswer