//////////1. Your investment in a small business venture will produce cash flows

Question

//////////1. Your investment in a small business venture will produce cash flows that increase by 15 percent every year for the next 25 years. This cash flow stream is called: a. an annuity due. b. a growing perpetuity. c. an ordinary annuity. d. a growing annuity. //////////2. If your investment pays the same amount at the end of each year forever, the cash flow stream is called: a. a perpetuity. b. an ordinary annuity. c. an annuity due. d. none of the above. //////////3. George purchased a stock for $45 one year ago. The stock is now worth $65. During the year, the stock paid a dividend of $2.50. What is the total return to George from owning the stock? (Round your answer to the nearest whole percent.) (3 pts) a. 5% b. 44% c. 35% d. 50% //////////4. Barbara purchased a piece of real estate last year for $85,000. The real estate is now worth $102,000. If Barbara needs to have a total return of 25 percent during the year, then what is the dollar amount of income that she needed to have to reach her objective? (4 pts) a. $3,750 b. $4,250 c. $4,750 d. $5,250 //////////5. The risk-free rate of return is currently 3 percent, whereas the market risk premium is 6 percent. If the beta of Lenz, Inc., stock is 1.8, then what is the expected return on Lenz? (4 pts) a. 8.40% b. 10.80% c. 13.80% d. 19.20% //////////6. Which one of the following statements is NOT true? a. Weak-form market efficiency implies that investors who have access to inside or private information will be able to earn abnormal returns. b. Semistrong-form market efficiency implies that investors who have access to inside or private information will be able to earn abnormal returns. c. Strong-form market efficiency implies that investors who have access to inside or private information will be able to earn abnormal returns. d. None of the above. //////////7. Bonds sell at a discount off the par value when market rates for similar bonds are a. Less than the bond

Explanation / Answer

1. Your investment in a small business venture will produce cash flows that increase by 15 percent every year for the next 25 years. This cash flow stream is called:

a. an annuity due.

b. a growing perpetuity.

c. an ordinary annuity.

d. a growing annuity

If your investment pays the same amount at the end of each year forever, the cash flow stream is called:

a. a perpetuity

. b. an ordinary annuity.

c. an annuity due.

d. none of the above.

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