Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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A
company has a share price of 230p and paid dividends last year of 10p per share. Dividend
growth is expected to be 5 per cent. What is the rate of return required by
equity? a. | 9.35% | c. | 9.56% | b. | 4.56% | d. | 4.35% | | | | |
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2.
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The
dividend yield on a company's stock is 8 per cent and its retention ratio is 40 per cent. What
is the rate of return required by the equity investors? a. | 15.38% | c. | 1.76% | b. | 14.08% | d. | 8.24% | | | | |
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3.
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A
company's beta coefficient has an R2 of 0.4. What does this mean? a. | Forty per cent
of the variability in the security's returns is explained by the variability of the
index | c. | The beta
coefficient is quite unreliable | b. | Forty per cent of returns is explained by the returns on the
index | d. | Forty per cent
of the variability in the index is explained by the variability of the security's
returns | | | | |
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4.
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A
multiple regression of returns on a security against the index show a principal coeffcient of 0.8, a
one month forward lagged coeffcient of 0.24 and one month historical lag of 0.5. What is your
estimate of the beta coefficient?
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5.
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The
raw beta observed from 60 months of monthly return data is 2.4. What is the corrected beta
using the Blume adjustment? a. | 1.9 | c. | 1.895 | b. | 2.4 | d. | 1.5254 | | | | |
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