Suppose the yield on short-term government securities (perceived to be risk-free) is about 6%. Suppose also that the expected return required by the market for a portfolio with a beta of 1 is 12.0%. According to the capital asset pricing model: a. What is the expected return on the market portfolio? (Round your answer to 1 decimal place.) b. What would be the expected return on a zero-beta stock? Suppose you consider buying a share of stock at a price of $85. The stock is expected to pay a dividend of $11 next year and to sell then for $88. The stock risk has been evaluated at β = –0.5. c-1. Using the SML, calculate the fair rate of return for a stock with a β = –0

Partnerships are the most common type of business firms in the world. t/f

Each of the four independent situations below describes a sales-type lease in which annual lease payments of $12,500 are payable at the beginning of each year. each is a finance lease for the lessee. (fv of $1, pv of $1, fva of $1, pva of $1, fvad of $1 and pvad of $1) (use appropriate factor(s) from the tables provided.) situation 1 2 3 4 lease term (years) 3 3 3 3 asset’s useful life (years) 3 4 4 6 lessor’s implicit rate (known by lessee) 14 % 14 % 14 % 14 % residual value: guaranteed by lessee 0 $ 5,000 $ 2,500 0 unguaranteed 0 0 $ 2,500 $ 5,000 purchase option: after (years) none 2 3 3 exercise price n/a $ 7,500 $ 1,500 $ 3,500 reasonably certain? n/a no no yes

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