Exhibit 7-4
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 122

Multiple Choice

Exhibit 7-4
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) $\begin{array}{ccccc}\text { Stock } & \text { Beta } & \text { Current Price } & \text { Expected Price } & \text { Expected Dividend } \\\hline \mathrm{X} & 0.8 & \$ 12.50 & \$ 13.10 & \$ 0.80 \\\mathrm{Y} & 1.1 & \$ 8.25 & \$ 9.76 & \$ 0.20 \\\mathrm{Z} & 2.1 & \$ 25.70 & \$ 30.04 & \$ 0.00\end{array}$
-Refer to Exhibit 7-4. What are the expected returns for stocks X, Y, and Z for the next period based on the above prices and dividends? $\begin{array}{lccc} & \mathbf{X} & \mathbf{Y} & \mathbf{Z} \\\hline \text { I. } & 4.8 \% & 18.3 \% & 16.9 \% \\\text { II. } & 10.7 \% & 17.5 \% & 14.4 \% \\\text { III. } & 11.2 \% & 20.7 \% & 16.9 \% \\\text { IV. } & 12.3 \% & 22.5 \% & 22.3 \% \\\text { V. } & 13.1 \% & 24.3 \% & 18.2 \%\end{array}$

• A) I
• B) II
• C) III
• D) IV
• E) V

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Definitions:

Wavelength

The distance between successive crests of a wave, often used to describe the spectrum of electromagnetic radiation.

Visible Light

The portion of the electromagnetic spectrum that is visible to the human eye, ranging approximately from 390 to 700 nanometers wavelength.

Energy

The capacity to perform work or to produce changes within a system, existing in kinetic, potential, thermal, electrical, chemical, nuclear, or other various forms.

Violet

A color at the end of the visible spectrum of light, next to blue, and opposite of yellow.