Question Details

What is the firm's required rate of return 


1.	Which of the following bonds would have the greatest percentage increase in value if all interest rates in the economy fall by 1%?

a.	10-year, zero coupon bond.
b.	20-year, 10% coupon bond.
c.	20-year, 5% coupon bond.
d.	1-year, 10% coupon bond.
e.	20-year, zero coupon bond.

2.	O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years.  Their nominal yield to maturity is 9.25%, they pay interest semiannually, and they sell at a price of $975.  What is the bond's nominal coupon interest rate?

a.	7.32%
b.	7.71%
c.	8.12%
d.	8.54%
e.	8.99%
	
3.	Cooley Company's stock has a beta of 1.32, the risk-free rate is 4.25%, and the market risk premium is 5.50%.  What is the firm's required rate of return ?

a.	10.93%
b.	11.51%
c.	10.13%
d.	8.75%
e.	10.01%
	
4.	Porter Inc's stock has an expected return of 10.75%, a beta of 1.25, and is in equilibrium.  If the risk-free rate is 5.00%, what is the market risk premium?

a.	5.15%
b.	4.28%
c.	4.32%
d.	4.60%
e.	4.55%
	
5.	Consider the following information and then calculate the required rate of return for the Global Investment Fund, which holds 4 stocks.  The market- required rate of return is 9.50%, the risk-free rate is 7.00%, and the Fund's assets are as follows:

	Stock	Investment	Beta
	A	$200,000	1.50
	B	$300,000	-0.50
	C	$500,000	1.25
	D	$1,000,000	0.75

a.	8.91%
b.	10.06%
c.	6.77%
d.	8.64%
e.	10.42%




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