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Saint MBA570 quiz 5




Question;Question 1.1.The effective annual rate for a credit card that charges a 19.9% APR compounded daily is closest to __________. (Points: 10) 18.15%19.9%22.0%24.2%Question 2.2.You are considering purchasing a new truck that will cost you $34,000. The dealer offers you 1.9% APR financing for 48 months (with payments made at the end of the month). Assuming you finance the entire $34,000 and finance through the dealer, your monthly payments will be closest to __________. (Points: 10) $708$725$736$1,086Question 3.3.If the current inflation rate is 4.2% and you are earning a real rate of return on an investment of 3.8%, then the nominal rate on this investment is closest to __________. (Points: 10) 3.8%4.2%8.0%8.2%Question 4.4.If the current inflation rate is 4% and you have an investment opportunity that pays 10%, then the real rate of interest on your investment is closest to __________. (Points: 10) 10.0%14.0%6.0%5.8%Question 5.5.Which of the following statements is false? (Points: 10) When we refer to the "risk-free interest rate," we mean the rate on U.S. Treasuries.Interest rates vary with the investment horizon.All borrowers, besides the U.S. Treasury, have some risk of default.When interest on a loan is tax deductible, taxes are reduced by the amount of interest paid.Question 6.6.A stock'salphais defined as the stock's: (Points: 10) expected return minus its required return.expected return minus its actual return.nominal return minus its required return.required return minus its actual return.Question 7.7.The tendency to hang on to losers and sell winners is known as the: (Points: 10) cascade effect.disposition effect.overconfidence bias.systematic behavior bias.Question 8.8.An individual's desire for intense risk-taking experiences is known as: (Points: 10) phenomenon seeking.herd seeking.sensation seeking.rational expectations seeking.Question 9.9.Which of the following statements is false? (Points: 10) If the market portfolio is efficient, then all securities and portfolios must plot on the SML, not just individual stocks.For most stocks the standard errors of the alpha estimates are large, so it is impossible to conclude that the alphas are statistically different from zero.It is not difficult to find individual stocks that, in the past have not plotted on the SML.Small stocks (those with lower market capitalization) have lower average returns.Question 10.10.ChihuahuaCorporation is expected to pay a $1.5 million dollar dividend every year in perpetuity. It has a cost of capital of 15%. Assume that the market portfolio is not efficient. Chihuahua has an expected return of 12%. The market value for Chihuahua is closest to __________. (Points: 10) $10.0 million$12.5 million$12.0 million$15 million


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