WACC $=[\frac{D}{V}(1-T_e)r_{\text{d}\text{o}\text{t}\text{k}}]+[\frac{P}{V}{r}_{\text{p}\text{r}\text{e}\text{f}\text{e}\text{r}\text{m}\text{e}\text{d}}]+[\frac{E}{V}{r}_{\text{e}\text{q}\text{u}\text{i}\text{l}\text{y}}]$

Sue purchased a stock for $$25$ a share, held it for one year, received a $$1\mathrm{.}34$ dividend, and sold

the stock for $$26\mathrm{.}45.$ What nominal rate of return did she earn?

A$)11\mathrm{.}16\%$

B$)14\mathrm{.}23\%$

C$)12\mathrm{.}09\%$

D$)10\mathrm{.}55\%$

The Dow Jones Industrial Average is:

A$)$ the most representative of the stock market indexes.

B$)$ an index of the $500$ largest corporate stocks in America.

C$)$ an index of $30$ major stocks.

D$)$ an equally weighted index of all stocks traded on the New York Stock Exchange.

Volatility is likely to be highest in which of the following investments?

A$)$ Common stocks

B$)$ Preferred stock

C$)$ Corporate bonds

D$)$ Treasury bonds

Risks that are peculiar to a single firm:

A$)$ are called market risks.

B$)$ cannot be diversified away.

C$)$ are called specific risks.

D$)$ tend to cause stocks to move together.

The idea that investors, on average, have earned a higher return from common stocks than from

Treasury bills supports the view that:

A$)$ investors are irrational.

B$)$ there is a relationship between risk and return.

C$)$ real rates of return will be lower during periods of price stability.

D$)$ stocks should be avoided when inflation is low.

The wider the dispersion of returns on a stock, the:

A$)$ lower the expected rate of return.

B$)$ higher the standard deviation.

C$)$ lower the real rate of return.

D$)$ lower the variance.

The variance of an investment's returns is a measure of the:

A$)$ volatility of the rates of return.

B$)$ probability of a negative return.

C$)$ historic return over long time periods.

D$)$ average value of the investment.