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# Expected return for an aggressive mix

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A firm has \$10,000,000 in assets. If it goes with a low liquidity plan for the assets, it can earn a return of 15 percent, but with a high liquidity plan, the return will be 10 percent. If the firm goes with a short-term financing plan, the financing costs on the \$10,000,000 will be 8 percent, and with a long-term financing plan, the financing costs on the \$10,000,000 will be 9 percent. Compute the anticipated return after financing costs on the most aggressive asset-financing mix.

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A firm has \$10,000,000 in assets. If it goes with a low liquidity plan for the assets, it can earn a return of 15 percent, but with a high liquidity plan, the return will be 10 percent. If the firm goes with a short-term financing plan, the financing costs on the \$10,000,000 will be 8 percent, and with a ...

#### Solution Summary

Response describes the steps to compute the expected return for an aggressive mix

\$2.19

## Accounting/Finance Multiple Choice

1) Comprehensive financial information about a company is found in its
A) Corporate by-law (B) 10-K Report (C) Article of incorporation (D) Presidential address

2) You purchase 100 shares of KLM at \$40 a share by depositing the minimum amount of margin. If the initial margin requirement was 50% and the maintenance margin requirement is 30% , you will get a margin call if KLM's price falls to:
A)\$12 (B) \$20 (C) \$29 (D)\$32

3) One perspective on risk asserts that the longer an investment is held ,the
A) less its risk because its periodic return will be less variable (B) Less it's the risk because its overall return will be higher (C) Greater its risk because its overall return will be lower (D) Greater its risk because its periodic returns will be more variable

4) An investment required rate of return is:
A) The return you expect to receive in the upcoming period(B) Its long-run average return (C) the return require by government regulators(D) the return it must earn to reward investors for the undertaking its inherent risks.

5) An example of a zero -beta asset is:
A) The stock of a rapidly growing Internet company, such as Yahoo!! (B) The stock of a mature company, such as General Motors (C) Treasury bills (D) A thoroughly diversified portfolio of common stock

6)You have just read the annual report of a mutual fund. Its boasted of 26% return and advertised that it had beaten the market return last year by 3% points In doing some research you discover the fund had a beta of + 1.5 and the return on a risk-free treasury securities was 15.0%. Assuming a market risk premium of 8.0% should be used to evaluate performance means that.
A)The fund performance was impressive ; 3% point is significant given the above data(B) The fund performance was good, but not impressive; it beat the market, but only by 1% point not 3(C) The funds performance was no better than what you would expected (D) The fund performance was actually a % point less than what you would have expected

7)Which item below describes a common stock total return?
A) Current return plus current yield (B) Current return plus future return (C) Future yield plus price appreciation (D) current yield plus future earning

8)If ACR's expected total return is 25% and its required rate of return is 20%, you should:
A) Buy the stock (B) Not by the stock (C) Buy the stock, but only if its dividend yield is 5% or greater (D) Current yield plus future earning

9)What item below is not a concern (to most investor) in bond investing
A)Most corporate bonds have redemption values of \$1,000(B) Commission and bid-asked spreads can be large(C)Bond price are often volatile(D) Investors must be on guard for a bond called by the issuer

10) With 10% discount rate, the present value factor of \$1 received at the end of each of the next 3 years are 0.909,0.826, and 0.751 respectively Given these value of a \$1,000 (par) 3-year corporate bond with 8% coupon rate is
A) \$949.88 (B) \$1,1198.88 (C) \$198.88 (D) \$751.00

11) The longer the maturity of a bond,
A) The less its price sensitivity (B) The lower its coupon rate (C) the less its price sensitivity and the lower its coupon rate (D) the greater its price sensitivity

12) The difference between a loan fund and a no load fund is that
A) Load fund invest in a variety of securities while a no load fund limit their investments to common stock(B) Loan fund borrow money to increase their portfolio while no load fund do not (C) you buy no-load fund at their net value, but you pay more than net asset value when you buy load funds. (D) No load fund can be purchase anywhere, but loan funds must be purchase through a stockbroker.

13) If you are seeking moderate growth and moderate current return, you should select a
A) loan fund (B) No-load Fund (C)open-end fund (D)Close end fund

14) If you are seeking moderate growth and moderate current returns you should select a
A) Money market fund (B) Income fund (C) Balance return (D) Mixed return

15)The gale market index fund advertise that it earn a 392% return. This is probably its
A)Cumulative total return over some number of years(B) Average annual total return over some years (C) Total return for the previous years (D) Return in relation to overall market

16)The Mark fund has a rate of return of 18% last year. If its Beta weight was +1.5 and if the return on the over all market was 15% its risk adjusted rate of return RAROR is
1)+19.5% (B) -3.0% (C)+ 23.0 (D) +2.0%

17) A unit investment trust differ from a mutual fund in that
A) Its offer a combination of debit and equity securities in the unit (B) Its originator guarantees a redemption price (C) Its original portfolio is generally unchanged until the trust is dissolve (D) It require considerably greater portfolio
management
18) Consider the following assets:
A)I. Treasury strips (B) Coupon Treasury bonds (C) Growth Stocks (D) Medium quality corporate Bonds
An aggressive investor seeking high current income would prefer
A) I (B)II (C) III. (D) IV

19) The best strategy for selecting mutual funds in the 401(K) plan is to
A) Pick an index fund (B) Pick an aggressive growth fund, using last year performance as a guide.(C) Select a number of fund to achieve broad diversification (D) Pick a money market fund to avoid risk

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