BUS 3302 EXAM 3 POTTS PERSONAL FINANCE QUESTIONS WITH CORRECT ANSWERS

Historical rates of return place BLANK at the high end and BLANK at the lower end


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Common stocks; T-Bills




Which of the items below should you expect to receive from a full-service broker?

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Assistance in tailoring a portfolio to meet your needs; Advice on what
stocks to buy or sell




Examining almost 70 years of evidence of returns on common stocks, corporate and
treasury bonds, treasury bills, and inflation indicates that over the entire period


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Common stocks showed the highest average rate of return but also
showed the most risk




What would you pay for a common stock that just paid a $1 dividend, has a growth
rate of 8%, and a required rate of 14%?


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$18


Math:
STEP 1: Solve for D1
D1 = Do (1 + g)
= 1 (1.08)
D1 = 1.08

STEP 2: Solve for Price of stock
Ps = (D1 / (Ks - g))
= 1.08 / (0.14 - 0.08)
= 1.08 / .06
Ps = $18