Investments Midterm 2 Questions and Answers | 100% Correct,
Guaranteed A Grade2024-2025
Manchester Corp stock currently sells for $60. The dividend yield
is 4% and the dividend payout ratio is 40%. The dividend is ___ and
the earnings per share are ___. - <<ANSWER>>Dividends = 60*.04
= $2.40
EPS = 2.4/EPS = .4 , 2.4*4 = $6.00
The stock price of a put option is the price ___. - <<ANSWER>>at
which the underlying stock can be sold
(put = right to sell)
The price of ABC stock is currently $42 per share, but in six
months you expect it to rise to $50.ABC does not pay a dividend.
You buy one six-month call on ABC, with a strike price of $46. The
, premium of the call is $2. What holding period return do you expect
on this call? Ignore the transaction costs and taxes. -
<<ANSWER>>100%
(50-46)*100 = 400
= -200
= 200
= 100%
Worcester Corporation has a P/E ratio of 15. Natick Corporation is
in the same industry as Worcester, but has a P/E ratio of 20.
Possible interpretations of this discrepancy include___. -
<<ANSWER>>Investors expect Natick to grow faster than Worcester
What is the percentage of a firm's earnings that us distributed to
shareholders called? - <<ANSWER>>payout ratio
In the Capital Asset Pricing Model, which of the following factors
are used to determine the required rate of return? - <<ANSWER>>I.
the risk-free interest rate
III. expected return on the market portfolio
IV. beta
I, III, and IV only
Guaranteed A Grade2024-2025
Manchester Corp stock currently sells for $60. The dividend yield
is 4% and the dividend payout ratio is 40%. The dividend is ___ and
the earnings per share are ___. - <<ANSWER>>Dividends = 60*.04
= $2.40
EPS = 2.4/EPS = .4 , 2.4*4 = $6.00
The stock price of a put option is the price ___. - <<ANSWER>>at
which the underlying stock can be sold
(put = right to sell)
The price of ABC stock is currently $42 per share, but in six
months you expect it to rise to $50.ABC does not pay a dividend.
You buy one six-month call on ABC, with a strike price of $46. The
, premium of the call is $2. What holding period return do you expect
on this call? Ignore the transaction costs and taxes. -
<<ANSWER>>100%
(50-46)*100 = 400
= -200
= 200
= 100%
Worcester Corporation has a P/E ratio of 15. Natick Corporation is
in the same industry as Worcester, but has a P/E ratio of 20.
Possible interpretations of this discrepancy include___. -
<<ANSWER>>Investors expect Natick to grow faster than Worcester
What is the percentage of a firm's earnings that us distributed to
shareholders called? - <<ANSWER>>payout ratio
In the Capital Asset Pricing Model, which of the following factors
are used to determine the required rate of return? - <<ANSWER>>I.
the risk-free interest rate
III. expected return on the market portfolio
IV. beta
I, III, and IV only
