1.You are considering purchasing a new automobile that will cost you $28,000. The dealer offers you 4.9% APR financing for 60 months (with payments made at the end of the month). Assuming you finance the entire $28,000 and finance through the dealer, your monthly payments will be closest to __________. (Points : 10) $1,454 $527 $467 $457Question 2.2.Floyd Ferris invested $3,000 into an account five years ago. Today his account has grown to have a balance of $3,927.50. Given that his account offered monthly compounding of interest, the APR on this account is was closest to __________. (Points : 10) 5.00% 5.25% 5.40% 5.54%Question 3.3.Which of the following statements is false? (Points : 10) An inverted yield curve generally signals an expected decline in future interest rates. An inverted yield curve is often interpreted as a positive forecast for economic growth. All the formulas for computing present values of annuities and perpetuities are based upon discounting all of the cash flows at the same rate. The rate of growth of your purchasing power is determined by the real interest rate.Question 4.4.If the current inflation rate is 4% and you have an investment opportunity that pays 10%, then the real rate of interest on your investment is closest to __________. (Points : 10) 10.0% 14.0% 6.0% 5.8%Question 5.5.Which of the following statements is false? (Points : 10) U.S. Treasury securities are widely regarded to be risk-free because there is virtually no chance the government will default on these bonds. In general, if the interest rate isrand the tax rate is?, then for each $1 invested you will earn interest equal torand owe taxes of?×ron the interest. Investors may receive less than the stated interest rate if the borrowing company has financial difficulties and is unable to fully repay the loan. Taxes reduce the amount of interest the investor can keep, and we refer to this reduced amount as the tax effective interest rate.Question 6.6.The CAPM does not require investors have homogeneous expectations, but rather that they have: (Points : 10) rational biases. no biases. heterogeneous expectations. rational expectations.Question 7.7.The tendency to hang on to losers and sell winners is known as the: (Points : 10) cascade effect. disposition effect. overconfidence bias. systematic behavior bias.Question 8.8.The tendency of uninformed individuals to overestimate the precision of their knowledge is known as: (Points : 10) overconfidence bias. herd behavior. familiarity bias. disposition bias.Question 9.9.Which of the following statements is false? (Points : 10) If the market portfolio is efficient, then all securities and portfolios must plot on the SML, not just individual stocks. For most stocks the standard errors of the alpha estimates are large, so it is impossible to conclude that the alphas are statistically different from zero. It is not difficult to find individual stocks that, in the past have not plotted on the SML. Small stocks (those with lower market capitalization) have lower average returns.Question 10.10.ChihuahuaCorporation is expected to pay a $1.5 million dollar dividend every year in perpetuity. It has a cost of capital of 15%. Assume that the market portfolio is not efficient. Chihuahua has an expected return of 12%. The market value for Chihuahua is closest to __________. (Points : 10) $10.0 million $12.5 million $12.0 million $15 million

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