What is the expected return and standard deviation for the following stock? \[\begin{array} { l c c } { \text { State of } } & \text { Probability of } & \text { Rate of Return } \\ \text { Econony } & \text { State of Economy } & \text { if State Occurs } \\ \text { Boorn } & .06 & - .06 \\ \text { Normal } & .74 & .07 \\ \text { Recession } & .20 & .18 \end{array}\]

A) 8.53 percent; 5.69 percent B) 8.53 percent; 5.74 percent C) 8.42 percent; 5.69 percent D) 8.80 percent; 5.74 percent E) 8.42 percent; 5.74 percent A) 8.53 percent; 5.69 percent B) 8.53 percent; 5.74 percent C) 8.42 percent; 5.69 percent D) 8.80 percent; 5.74 percent E) 8.42 percent; 5.74 percent

What is the variance of the returns on a portfolio comprised of $4,200 of Stock G and $5,300 of Stock H? \[\begin{array} { l c c } { \text { State of } } & \text { Probability of } & \text { Rate of Return } \\ \text { Econony } & \text { State of Economy } & \text { if State Occurs } \\ & &\begin{array}{ll}\text { Stock G } & \text { Stock H }\end{array}\\ \text { Boom } & .18& \begin{array}{ll}.18& \quad \quad .08\end{array} \\ \text { Normal } & .82 & \begin{array}{ll}.14 & \quad \quad.11\end{array} \\ \end{array}\]

A) .000209 B) .000248 C) .000000 D) .001324 E) .000168 A) .000209 B) .000248 C) .000000 D) .001324 E) .000168

What is the standard deviation of the returns on a portfolio that is invested 37 percent in Stock Q and 63 percent in Stock R? \[\begin{array} { l c c } { \text { State of } } & \text { Probability of } & \text { Rate of Return } \\ \text { Econony } & \text { State of Economy } & \text { if State Occurs } \\ & &\begin{array}{ll}\text { Stock Q } & \text { Stock R }\end{array}\\ \text { Boom } & .15& \begin{array}{ll}.16& \quad \quad .15\end{array} \\ \text { Normal } & .85 & \begin{array}{ll}.09 & \quad \quad.13\end{array} \\ \end{array}\]

A) 1.37 percent B) 2.47 percent C) 1.63 percent D) 1.28 percent E) 2.09 percent A) 1.37 percent B) 2.47 percent C) 1.63 percent D) 1.28 percent E) 2.09 percent

Which one of the following stocks is correctly priced if the risk-free rate of return is 2.84 percent and the market rate of return is 10.63 percent? $\begin{array}{ccc} && \text { Expected } \\ \text { Stock } & \text { Beta } & \text { Retumn } \\ \mathrm{A} & .93 & .0892 \\ \mathrm{~B} & 1.18 & .1203 \\ \mathrm{C} & 1.47 & .1540 \\ \mathrm{D} & 1.02 & .1006 \\ \mathrm{E} & 1.26 & .1187 \end{array}$

A) A B) B C) C D) D E) E A) A B) B C) C D) D E) E

You are comparing Stock A to Stock B. Given the following information, what is the difference in the expected returns of these two securities? \[\begin{array} { l c c } { \text { State of } } & \text { Probability of } & \text { Rate of Return } \\ \text { Econony } & \text { State of Economy } & \text { if State Occurs } \\ & &\begin{array}{ll}\text { Stock A } & \text { Stock B }\end{array}\\ \text { Normal } & .75 & \begin{array}{ll}.13 & \quad \quad .16\end{array} \\ \text { Recession } & .25 &\begin{array}{ll} -05 & \quad \quad - . 21\end{array} \end{array}\]

A) 5.25 percent B) 1.75 percent C) 3.05 percent D) 2.45 percent E) 1.55 percent A) 5.25 percent B) 1.75 percent C) 3.05 percent D) 2.45 percent E) 1.55 percent

You own a portfolio with the following expected returns given the various states of the economy. What is the overall portfolio expected return? \[\begin{array} { l c c } \text { State of } & \text { Probability of } & \text { Rate of Return } \\ \text { Economy } & \text { State of Economy } & \text { if State Occurs } \\ \text { Boorn } & .25 & .185 \\ \text { Nomal } & .60 & .143 \\ \text { Bust } & .15 &. 032 \end{array}\]

A) 14.49 percent B) 14.64 percent C) 13.87 percent D) 13.69 percent E) 14.23 percent A) 14.49 percent B) 14.64 percent C) 13.87 percent D) 13.69 percent E) 14.23 percent

Consider the following information: \[\begin{array} { l c c } { \text { State of } } & \text { Probability of } & \text { Rate of Return } \\ \text { Econony } & \text { State of Economy } & \text { if State Occurs } \\ & &\begin{array}{ll}\text { Stock A } & \text { Stock B }\end{array}\\ \text { Recession } & .04& \begin{array}{ll}.097& \quad \quad .102\end{array} \\ \text { Normal} & .72& \begin{array}{ll}.114& \quad \quad .133\end{array} \\ \text { Boom } & .24 & \begin{array}{ll}.156 & \quad \quad.148\end{array} \\ \end{array}\] The market risk premium is 7.4 percent, and the risk-free rate is 3.1 percent. The beta of Stock A is ________ and the beta of Stock B is ________.

A) 1.25; 1.89 B) 1.47; 1.76 C) 1.21; 1.76 D) 1.47; 1.41 E) 1.25; 1.41 A) 1.25; 1.89 B) 1.47; 1.76 C) 1.21; 1.76 D) 1.47; 1.41 E) 1.25; 1.41

Exam 13: Return, Risk, and the Security Market Line

What is the expected return and standard deviation for the following stock? State of Probability of Rate of Return Econony State of Economy if State Occurs Boorn .06 -.06 Normal .74 .07 Recession .20 .18

(Multiple Choice)

4.8/5

(42)

Question 61

What is the variance of the returns on a portfolio comprised of $4,200 of Stock G and $5,300 of Stock H? State of Probability of Rate of Return Econony State of Economy if State Occurs Stock G Stock H Boom .18 .18 .08 Normal .82 .14 .11

(Multiple Choice)

5.0/5

(35)

Question 62

A stock has an expected return of 13.24 percent, the risk-free rate is 4.4 percent, and the market risk premium is 8.98 percent. What is the stock's beta?

(Multiple Choice)

4.8/5

(40)

Question 63

The expected return on JK stock is 16.28 percent while the expected return on the market is 11.97 percent. The stock's beta is 1.63. What is the risk-free rate of return?

(Multiple Choice)

4.8/5

(33)

Question 64

What is the standard deviation of the returns on a portfolio that is invested 37 percent in Stock Q and 63 percent in Stock R? State of Probability of Rate of Return Econony State of Economy if State Occurs Stock Q Stock R Boom .15 .16 .15 Normal .85 .09 .13

(Multiple Choice)

4.8/5

(30)

Question 65

Which one of the following stocks is correctly priced if the risk-free rate of return is 2.84 percent and the market rate of return is 10.63 percent? Expected Stock Beta Retumn .93 .0892 1.18 .1203 1.47 .1540 1.02 .1006 1.26 .1187

(Multiple Choice)

4.9/5

(38)

Question 66

Which one of the following is the formula that explains the relationship between the expected return on a security and the level of that security's systematic risk?

(Multiple Choice)

4.8/5

(36)

Question 67

The common stock of Alpha Manufacturers has a beta of 1.24 and an actual expected return of 13.25 percent. The risk-free rate of return is 3.7 percent and the market rate of return is 11.78 percent. Which one of the following statements is true given this information?

(Multiple Choice)

4.8/5

(38)

Question 68

You are comparing Stock A to Stock B. Given the following information, what is the difference in the expected returns of these two securities? State of Probability of Rate of Return Econony State of Economy if State Occurs Stock A Stock B Normal .75 .13 .16 Recession .25 -05 -.21

(Multiple Choice)

4.9/5

(35)

Question 69

Systematic risk is measured by:

(Multiple Choice)

4.8/5

(36)

Question 70

The principle of diversification tells us that:

(Multiple Choice)

4.9/5

(43)

Question 71

At a minimum, which of the following would you need to know to estimate the amount of additional reward you will receive for purchasing a risky asset instead of a risk-free asset? I. Asset's standard deviation II. Asset's beta III. Risk-free rate of return IV. Market risk premium

(Multiple Choice)

4.9/5

(34)

Question 72

Which one of the following is an example of systematic risk?

(Multiple Choice)

4.9/5

(35)

Question 73

The returns on the common stock of New Image Products are quite cyclical. In a boom economy, the stock is expected to return 23 percent in comparison to 14 percent in a normal economy and a negative 18 percent in a recessionary period. The probability of a recession is 18 percent while the probability of a boom is 22 percent. What is the standard deviation of the returns on this stock?

(Multiple Choice)

4.9/5

(37)

Question 74

The expected risk premium on a stock is equal to the expected return on the stock minus the:

(Multiple Choice)

4.8/5

(40)

Question 75

You recently purchased a stock that is expected to earn 19 percent in a booming economy, 12 percent in a normal economy, and lose 8 percent in a recessionary economy. The probability of a boom economy is 16 percent while the probability of a normal economy is 78 percent. What is your expected rate of return on this stock?

(Multiple Choice)

4.8/5

(33)

Question 76

Which one of the following is an example of unsystematic risk?

(Multiple Choice)

4.7/5

(35)

Question 77

You own a portfolio with the following expected returns given the various states of the economy. What is the overall portfolio expected return? State of Probability of Rate of Return Economy State of Economy if State Occurs Boorn .25 .185 Nomal .60 .143 Bust .15 .032

(Multiple Choice)

4.7/5

(39)

Question 78

The market risk premium is computed by:

(Multiple Choice)

4.8/5

(31)

Question 79

Consider the following information: State of Probability of Rate of Return Econony State of Economy if State Occurs Stock A Stock B Recession .04 .097 .102 Normal .72 .114 .133 Boom .24 .156 .148 The market risk premium is 7.4 percent, and the risk-free rate is 3.1 percent. The beta of Stock A is and the beta of Stock B is .

(Multiple Choice)

4.9/5

(39)

Question 80

Exam 13: Return, Risk, and the Security Market Line

What is the expected return and standard deviation for the following stock? State of Probability of Rate of Return Econony State of Economy if State Occurs Boorn .06 -.06 Normal .74 .07 Recession .20 .18

What is the variance of the returns on a portfolio comprised of $4,200 of Stock G and $5,300 of Stock H? State of Probability of Rate of Return Econony State of Economy if State Occurs Stock G Stock H Boom .18 .18 .08 Normal .82 .14 .11

A stock has an expected return of 13.24 percent, the risk-free rate is 4.4 percent, and the market risk premium is 8.98 percent. What is the stock's beta?

The expected return on JK stock is 16.28 percent while the expected return on the market is 11.97 percent. The stock's beta is 1.63. What is the risk-free rate of return?

What is the standard deviation of the returns on a portfolio that is invested 37 percent in Stock Q and 63 percent in Stock R? State of Probability of Rate of Return Econony State of Economy if State Occurs Stock Q Stock R Boom .15 .16 .15 Normal .85 .09 .13

Which one of the following stocks is correctly priced if the risk-free rate of return is 2.84 percent and the market rate of return is 10.63 percent? Expected Stock Beta Retumn .93 .0892 1.18 .1203 1.47 .1540 1.02 .1006 1.26 .1187

Which one of the following is the formula that explains the relationship between the expected return on a security and the level of that security's systematic risk?

The common stock of Alpha Manufacturers has a beta of 1.24 and an actual expected return of 13.25 percent. The risk-free rate of return is 3.7 percent and the market rate of return is 11.78 percent. Which one of the following statements is true given this information?

You are comparing Stock A to Stock B. Given the following information, what is the difference in the expected returns of these two securities? State of Probability of Rate of Return Econony State of Economy if State Occurs Stock A Stock B Normal .75 .13 .16 Recession .25 -05 -.21

Systematic risk is measured by:

The principle of diversification tells us that:

At a minimum, which of the following would you need to know to estimate the amount of additional reward you will receive for purchasing a risky asset instead of a risk-free asset? I. Asset's standard deviation II. Asset's beta III. Risk-free rate of return IV. Market risk premium

Which one of the following is an example of systematic risk?

The expected risk premium on a stock is equal to the expected return on the stock minus the:

Which one of the following is an example of unsystematic risk?

You own a portfolio with the following expected returns given the various states of the economy. What is the overall portfolio expected return? State of Probability of Rate of Return Economy State of Economy if State Occurs Boorn .25 .185 Nomal .60 .143 Bust .15 .032

The market risk premium is computed by:

Introduction to Corporate Finance

Financial Statements, Taxes, and Cash Flow

Working with Financial Statements

Long-Term Financial Planning and Growth

Introduction to Valuation: The Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons from Capital Market History

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Payout Policy

Short Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Behavioral Finance: Implications for Financial Management

Enterprise Risk Management

Options and Corporate Finance

Option Valuation

Mergers and Acquisitions

Leasing

Filters