Question

30. Generally, there should be a tradeoff between risk and return: the higher the risk, the higher the expected return. a. True b. False 31. You purchased a share of BestBuy stock on January 1, 2001, at a price of $50.00 per share. A year later the share price was $58.00. In addition, the dividend paid to you was 1.00. Based on the information, the return over the year is a. b. c. d. 15% 16% 17% 18% 32. You are considering an investment. You estimate the beta to be 1.6. If the risk-free rate of interest is 4% and the return on the market is 9%, what is required rate of return on this investment? a. 5% b. 10% с. 12% d. 13% 33. A preferred stock pays dividend $8/year, and the required rate of return is 6 percent. The value (fair market price) of the preferred stock should be a. $150 b. $145 c. $133 d. $125 34. Elizabeth Taylor is considering a bond investment. The $1,000 bonds have an annual coupon interest rate of 6 percent and the interest is paid semiannually. The yield to maturity on the bonds is 8 percent annual interest rate. There are 5 years remaining until maturity. Compute the price of the bond based on the semiannual compounding? Choose the closest number. a. $950 b. $919 c. $1200 d. $1000