1. Omega Inc. is an unlevered firm that is equally as risky as the market. U.S. Treasury bills are yielding 3.2 percent and the market risk premium is 7.5 percent. What discount rate should be assigned to a project that has the same risks as Omega? A. 3.2 percent B. 10.7 percent C. 7.5 percent D. 4.3 percent
2. A stock returned 13 percent, 18 percent, -16 percent and -1 percent annually for the past four years. The standard deviation of these returns is given as 15.29 percent. Assuming that the stock's returns are normally distributed, what is the 95.44 percent probability range for any one given year? A. -11.8% to 18.8% B. -42.4% to 49.4% C. -47.1% to 52.3% D. -27.1% to 34.1%