1) Exhibit 12.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information that you propose to use to obtain an estimate of
year 2004 EPS for the MacLog Company.
In addition a regression analysis indicates the following relationship between growth in
sales per share for MacLog and GDP growth is
Calculate the firm’s EPS for the year 2004.
a. $15.25
b. $14.66
c. $17.25
d. $12.56
e. $18.57
2) Exhibit 14.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
At the end of the year 2010 the BRK Corporation had free cash flow to equity (FCFE)
of $250,000 and shares outstanding of 200,000. The company projects the following
annual growth rates in FCFE:
From year 2019 onward growth in FCFE is expected to remain constant at 5% per year.
The stock has a beta of 1.3 and the current market price is $55. Currently the yield on
10-year Treasury notes is 5% and the equity risk premium is 4%.
Calculate the present value now (Year 2010) of FCFE during the period of declining
growth (that is for years 2015 to 2018).
a. $1,719,119
b. $1,715,784
c. $1,115,195
d. $1,434,903
e. $1,809,171
3) If you were to purchase an October option with an exercise price of 50 for $8 and
simultaneously sell an October option with an exercise price of 60 for $2, you would be
a. Bullish and taking a high risk.
b. Bullish and conservative.
c. Bearish and taking a high risk.
d. Bearish and conservative.
e. Neutral.
4) All of the following are advantages of secondary markets except
a.Provide liquidity to individuals holding the securities.
b.Support the primary market by reducing the required rate of return due to the lower
liquidity risk for securities.
c.Provide price discovery for corporations selling seasoned securities.
d.Impact market efficiency and price volatility.
e.All of the above are advantages of secondary markets.
5) Consider a two-factor APT model where the first factor is changes in the 30-year
T-bond rate, and the second factor is the percent growth in GNP. Based on historical
estimates you determine that the risk premium for the interest rate factor is 0.02, and the
risk premium on the GNP factor is 0.03. For a particular asset, the response coefficient
for the interest rate factor is −1.2, and the response coefficient for the GNP factor is
0.80. The rate of return on the zero-beta asset is 0.03. Calculate the expected return for
the asset.
a. 5.0%
b. 2.4%
c. −3.0%
d. −2.4%
e. 3.0%
6) Exhibit 10.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You are provided with the following information for a company.
Calculate the receivables turnover ratio.
a. 50
b. 25
c. 55
d. 36
e. 27
7) Event studies are used to test the
a.Weak-form efficient market hypothesis (EMH).
b.Semistrong-form efficient market hypothesis (EMH).
c.Strong-form efficient market hypothesis (EMH).
d.Both b and c.
e.All of the above.
8) Which of the following economic series is not included in the National Bureau of
Economic Research (NBER) coincident economic indicator group?
a. Total value of commercial loans
b. Employees on nonagricultural payrolls
c. Personal income less transfer payments
d. Industrial production
e. Manufacturing and trade sales
9) Between 1990 and 2000, the standard deviation of the returns for the NIKKEI and
the DJIA indexes were 0.18 and 0.16, respectively, and the covariance of these index
returns was 0.003. What was the correlation coefficient between the two market
indicators?
a. 9.6
b. 0.0187
c. 0.1042
d. 0.0166
e. 0.343
10) Which of the following is not a global equity indicator series?
a.Morgan Stanley Capital International Indexes
b.Dow Jones World Stock Index
c.FT/S & P-Actuaries World Indexes
d.Merrill Lynch-Wilshire World Indexes
e.None of the above (that is, each is a global equity indicator series)
11) What is the expected return of the three stock portfolio described below?
a. 14.89%
b. 16.22%
c. 12.66%
d. 13.85%
e. 16.99%
12) The relationship between an economic series such as disposable personal income
and industry sales is usually stronger in an industry that is more specialized.
13) The T-Bill-Eurodollar yield spread widens during periods of international crisis.
14) The payoffs to both long and short position in the forward contact are symmetric
around the contract price.
15) The spending phase occurs when investors are relatively young.
16) By attaching a convertible feature to a bond issue a firm can often get a lower rate
of interest on its debt.
17) Interest rate parity is a key concept in managing risk in the commodities market.
18) Global industry analysis must evaluate the effects not only of world supply, demand
and cost components for an industry, but also different valuation levels due to
accounting conventions and the impact of exchange rates.
19) The slope of the efficient frontier is calculated as follows