FNCE 451 Study Guide - Midterm Guide: Standard Deviation, Net Present Value, Tax Shield

• School: University of Calgary
• Department: Finance
• Course: FNCE 451
• Professor: J.Ari Pandes

Document Summary

Part 1 [2 points each = 20 points]: multiple choice. Circle the best answer: the double dip co. is expecting its ice cream sales to decline due to the increased interest in healthy eating. Thus, the company has announced that it will be reducing its annual dividend by 5% a year for the next two years. After that, it will maintain a constant dividend of a share. Two weeks ago, the company paid a dividend of . 40 per share. However, the risk of stock a as measured by its variance is 3 times that of stock b. If the two stocks are combined equally in a portfolio, what would be the portfolio"s expected return: 20. 0%, 4. 0%, 12. 0%. D. greater than 20%: two mutually exclusive investment opportunities require an initial investment of million. Investment a then generates million per year in perpetuity, while investment b pays.