Hawaii BUSA321 exam 2

BUSA321 exam 2

Question 1 of 18

6.0 Points

One of your relatives wants to retire in 25 years and expects her retirement to last 30 years. She wants to take out (i.e., withdraw) $3,000 per month over those 30 years. Assume that she can earn 5% per year on his investments.
a) (3 pts) First, what is the amount of the “nest egg” needed in 25 years?
b) (3 pts) What amount today does she need to put away in order to achieve that “nest egg”? Note that she is putting away one lump sum today, not an annuity.

Question 2 of 18 3.0 Points In your own words, what does the beta coefficient of a stock measure? NOTE: Explain more than just “market risk”.
Question 3 of 18	4.0 Points

How can an investor “diversify”? What does that mean?

Question 4 of 18

4.0 Points

You can invest $2,000 today and expect to receive $2,247.20 at the end of the second year. What annual return will you make?

Question 5 of 18 4.0 Points What is the best measure of risk for an asset held in isolation? Note: …if you are comparing the risk of one asset to one other asset.

Question 6 of 18

5.0 Points

You are presented with an investment opportunity to receive $5,000 at the end of year 1; $4,000 at the end of year 2; $3,000 at the end of year 3; and $5,000 at the end of year 4. If you can earn 5% on a similar risk investment, what is the most you should be willing to pay today for this investment?

Question 7 of 18

5.0 Points

At the beginning of last year, you owned $6,000 of ThisClassIsUseful Company and $9,000 of WillMissThisClass Company. Over that year, the returns were 7.2% for ThisClassIsUseful and 4.9% for WillMissThisClass. What was the portfolio return?

Question 8 of 18

6.0 Points

A company borrows $100,000 today to be repaid in equal monthly payments over 4 years. The loan has an annual interest rate of 6%.
a) (4 pts) What is the monthly payment?
b) (2 pts) What is the total interest paid on the loan if no additional or early payments are made on the loan?

Question 9 of 18	5.0 Points

You decide to put away $4,000 at the end of every year for the next 5 years. If you can earn 5%/year on these deposits, what will you end up with at the end of 5 years?

Question 10 of 18

3.0 Points

You invested $600 ten years ago in an investment that has grown to be about $1,180.30 today. What was your annual return on this investment?

Question 11 of 18 4.0 Points You expect to receive $5,000 in 4 years (i.e., end of year 4). Then you plan to invest it earning 5% per year. What will you have at the end of year 20?

Question 12 of 18 3.0 Points If a loan has a stated APR rate of 8%, what is the loan’s effective rate if there are quarterly payments (every 3 months) required? Question 13 of 18 5.0 Points You deposit $1,500 at the end of the year (i.e., in 1 year) and then $2,000 at the end of year 3. What will you have at the end of year 6 if you can earn 5% per year on the investment? Question 14 of 18 6.0 Points On January 1, 2014 you purchased 500 shares of ThisClassIsFun Company for $41/share. At the end of 2014, you sold all 500 shares for $35/share. During the year, you collected $3.50/share in dividends from the stock. What was your dollar return AND percentage return on this investment? Question 15 of 18 4.0 Points How long in years (approximating) would it take for a $10,000 investment to double in size when the interest rate earned per year is 4%? Question 16 of 18 4.0 Points The WeLoveHI company has an average return of 10% and a standard deviation of 11%, whereas WeLoveOahu has an average return of 20% and a standard deviation of 14%. Which stock is riskier? Show all calculations. Question 17 of 18 5.0 Points You may consider an investment that would require a deposit today of $2,000. a) (3pts) If the investment earns 6% per year, what will you have at the end of 5 years? b) (2pts) What will be the total interest earned (in dollars) on this investment? Question 18 of 18 4.0 Points You have the chance to receive $500 at the end of 3 years. If you can earn 5% on similar risk investments, what is the most you should be willing to pay today for this investment (i.e., today’s value)?