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10. The current stock price of Company Y is $10 per share, and the stock does not pay dividends. Mr. Davis is a financial analyst and he summarizes the uncertainty about next year's holding period return on Stock Y by specifying the three possible scenarios: Business Conditions Strong Normal Weak The expected holding period return is End-of-Year Scenario, s Probability, P Price 15.10 0.17 0.62 11.50 7.20 0.21 В. 8.97 Е. 12.81 А. 5.81 С. 10.24 D. 12.09 Answer: 11. Fund S is a closed-end investment company with a portfolio currently worth $300 million. It has liabilities of $5 million and 9 million shares outstanding. If the fund sells for $30 a share, what is its premium or discount as a percent of NAV? A. 9.26% premium B. 8.47% premium C. 9.26% discount D. 8.47 % discount Answer: 12. Mutual funds that hold both equities and fixed-income securities in relatively stable proportions are called A. income funds B. balanced funds C. asset allocation funds D. index funds Answer: 13. If you are promised a nominal return of 10 % on a 1-year investment, and you expect the rate of inflation to be 2 % , what real rate do you expect to earn? A. 7.84 B. 8.06 E. 8.81 C. 8.24 D. 8.49 Answer: 8

Answer 1

10)

(15.1-10)/10 ВЗз В D Probability Expected return Return (r) [rxP(r)= u] [(P(r)] 32 51.0% 33 8.67% 0.17 34 15.0% 9.30% 0.62 35 -28.0% -5.88% 0.21 36 Expected 12.09% 37 return X

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