Consider the following information on three stocks: \[\begin{array} { l ccccc } { \text { State of } } & { \text { Probability of } } &&\text { Rate of Return }\\ \text { Economy } & \text { State of Economy } & &{ \text { if State Occurs } } \\ & & \text { Stock A } & \text { Stock B } & \text { Stock C } \\ \text { Boom } & .25 & .27 & .15 & .11 \\ \text { Normal } & .65 & .14 & .11 & .09 \\ \text { Bust } & .10 & - .19 & - .04 & .05 \end{array}\] A portfolio is invested 45 percent each in Stock A and Stock B and 10 percent in Stock C. What is the expected risk premium on the portfolio if the expected T-bill rate is 3.2 percent?

A) 11.47 percent B) 12.38 percent C) 1.67 percent D) 4.29 percent E) 8.71 percent A) 11.47 percent B) 12.38 percent C) 1.67 percent D) 4.29 percent E) 8.71 percent

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

You would like to combine a risky stock with a beta of 1.76 with U.S. Treasury bills in such a way that the risk level of the portfolio is equivalent to the risk level of the overall market. What percentage of the portfolio should be invested in the risky stock?

(Multiple Choice)

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Question 101

Thayer Farms stock has a beta of 1.38. The risk-free rate of return is 3.87 percent, the inflation rate is 3.93 percent, and the market risk premium is 9.03 percent. What is the expected rate of return on this stock?

(Multiple Choice)

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Question 102

Which one of the following statements is correct?

(Multiple Choice)

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Question 103

Consider the following information on three stocks: State of Probability of Rate of Return Economy State of Economy if State Occurs Stock A Stock B Stock C Boom .25 .27 .15 .11 Normal .65 .14 .11 .09 Bust .10 -.19 -.04 .05 A portfolio is invested 45 percent each in Stock A and Stock B and 10 percent in Stock C. What is the expected risk premium on the portfolio if the expected T-bill rate is 3.2 percent?

(Multiple Choice)

4.8/5

(33)

Question 104

Showing 101 - 104 of 104

You would like to combine a risky stock with a beta of 1.76 with U.S. Treasury bills in such a way that the risk level of the portfolio is equivalent to the risk level of the overall market. What percentage of the portfolio should be invested in the risky stock?

Thayer Farms stock has a beta of 1.38. The risk-free rate of return is 3.87 percent, the inflation rate is 3.93 percent, and the market risk premium is 9.03 percent. What is the expected rate of return on this stock?

Which one of the following statements is correct?

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

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