# FINANCE-You have chosen biology as your college major

Question 1(1 point)
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You have chosen biology as your college major because you would
like to be a medical doctor. However, you find that the probability of being
accepted into medical school is about 10 percent. If you are accepted into
medical school, then your starting salary when you graduate will be \$300,000
per year. However, if you are not accepted, then you would choose to work in a
zoo, where you will earn \$40,000 per year. Without considering the additional
educational years or the time value of money, what is your expected starting
salary as well as the standard deviation of that starting salary?
Question 1 options:

Expected Salary \$42,000; Std.
Deviation \$81,000

Expected Salary \$54,000; Std.
Deviation \$78,000

Expected Salary \$66,000; Std.
Deviation \$78,000

None of the above

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Question 2(1 point)
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Given the returns and probabilities for the three possible
states listed here, calculate the covariance between the returns of Stock A and
Stock B. For convenience, assume that the expected returns of Stock A and Stock
B are 0.12 and 0.15, respectively. (Round your answer to 4 decimal
places. For example .1244)

Probability

Return(A)

Return(B)

Good

0.35

0.30

0.50

OK

0.50

0.10

0.10

Poor

0.15

-0.25

-0.30

Your Answer:
Question 2 options:

Answer

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Question 3(1 point)
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In order to fund her retirement, Michele requires a portfolio
with an expected return of 0.11 per year over the next 30 years. She has
decided to invest in Stocks 1, 2, and 3, with 25 percent in Stock 1, 50 percent
in Stock 2, and 25 percent in Stock 3. If Stocks 1 and 2 have expected returns
of 0.11 and 0.10 per year, respectively, then what is the minimum
expected annual return for Stock 3 that will enable Michele to achieve her
investment requirement?
Your Answer:
Question 3 options:

Answer

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Question 4(1 point)
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The risk per unit of return is measured by the
Question 4 options:

coefficient of variation

median.

variance.

standard deviation.

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Question 5(1 point)
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Lee purchased a stock one year ago for \$28. The stock is now
worth \$34, and the total return to Lee for owning the stock
was 0.35. What is the dollar amount of dividends that he received
for owning the stock during the year?
Your Answer:
Question 5 options:

Answer

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Question 6(1 point)
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The beta of M Simon Inc., stock is 1.5, whereas the risk-free
rate of return is 0.08. If the expected return on the market
is 0.12, then what is the expected return on M Simon Inc?
Your Answer:
Question 6 options:

Answer

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Question 7(1 point)
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London purchased a piece of real estate last year for \$83,100.
The real estate is now worth \$100,900. If London needs to have a total
return of 0.23 during the year, then what is the dollar amount of income
that she needed to have to reach her objective?
Your Answer:
Question 7 options:

Answer

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Question 8(1 point)
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The risk-free rate of return is currently 0.02, whereas the
market risk premium is 0.06. If the beta of RKP, Inc., stock is 1.8, then
what is the expected return on RKP?
Your Answer:
Question 8 options:

Answer

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