Does anyone know the answers to these questions?
1. The risk premium for an investment is 3 percent. The inflation premium is 4 percent. If the pure rate of interest in the market is 4.5 percent, what should be the yield on a risk-free security? Use exact formulation.
| A. |
7.12% |
| B. |
6.60% |
| C. |
8.16% |
| D. |
7.64% |
| E. |
6.08% |
| F. |
8.68% |
| G. |
9.20% |
| H. |
9.72% |
2.
The Bank of Loans uses the following rating scheme to classify the riskiness of its customers.
| Risk Class | Risk Premium (%) |
| Prime | .05 |
| High grade | 1.0 |
| Upper medium grade | 1.5 |
| Lower medium grade | 2.0 |
| Speculative: Non-investment grade | 4.0 |
| Speculative: Highly | 6.0 |
| Substantial risks | 9.0 |
| Extremely speculative | 12.0 |
The bank’s pure rate of interest is 2.0% and the inflation premium is 3%.
What rate would the bank offer a customer who is in the lower medium grade risk class?
| A. |
8.74% |
| B. |
8.21% |
| C. |
9.26% |
| D. |
6.64% |
| E. |
9.79% |
| F. |
7.16% |
| G. |
7.69% |
| H. |
10.31% |
3.
Lowell Growth, Inc. has total debt ratio of 0.48 and a dividend payout ratio of 40 percent. If its profit margin is 9.5 percent and total asset turnover is 3.75, what is its return on assets ratio (ROA)?
| A. |
31.5% |
| B. |
24.0% |
| C. |
40.0% |
| D. |
27.6% |
| E. |
35.6% |
| F. |
20.6% |
| G. |
17.5% |
| H. |
14.6% |
