Question 1 1. The stock of Billingsley United has a beta of 0.92. The market risk premium is 8.4 percent and the risk-free rate is 3.2 percent. What is the expected return on this stock? 8.87 percent 9.69 percent 10.93 percent 11.52 percent 12.01 percent 1 points Expected return on stock = risk-free rate + beta(market risk premium) = 3.2 + 0.92(8.4) = 10.928 = 10.93 Question 2 1. You own a portfolio of two stocks, A and B. Stock A is valued at $6,540 and has an expected return of 11.2 percent. Stock B has an expected return of 8.1 percent. What is the expected return on the portfolio if the portfolio value is $9,500? 9.58 percent 9.62 percent 9.74 percent 9.97 percent 10.23 percent 1 points Return on stock A: 6,540 x 0.112 = $732.48 Return on stock B: 2,960 x 0.081 = $239.76 Total return on $9,500 portfolio: $972.24. Rate of return on $9,500 portfolio: 972.24 ? 9,500 = 0.1023 = 10.23%. Question 3 1. Portfolio diversification eliminates which one of the following? Total investment risk Portfolio risk premium Market risk Unsystematic risk Reward for bearing risk 1 points Question 4 1. What is the beta of the following portfolio? 0.98 1.02 1.11 1.14 1.20 1 points Question 5 1. You own a portfolio that has $1,900 invested in Stock A and $2,700 invested in Stock B. If the expected returns on these stocks are 9 percent and 15 percent, respectively, what is the expected return on the portfolio? 10.57 percent 11.14 percent 11.96 percent 12.52 percent 13.07 percent 1 points E(r) = [1,900/($1,900 + $2,700)][0.09] + [$2,700/($1,900 + $2,700)][0.15] = 12.52 percent Question 6 1. Standard deviation measures _____ risk while beta measures _____ risk. systematic; unsystematic unsystematic; systematic total; unsystematic total; systematic asset-specific; market 1 points Question 7 1. A $36,000 portfolio is invested in a risk-free security and two stocks. The beta of stock A is 1.29 while the beta of stock B is 0.90. One-half of the portfolio is invested in the risk-free security. How much is invested in stock A if the beta of the portfolio is 0.58? $6,000 $9,000 $12,000 $15,000 $18,000 1 points Question 8 1. What is the beta of the following portfolio? 1.08 1.14 1.17 1.21 1.23 1 points Question 9 1. The systematic risk is same as: Unique risk Diversifiable risk Asset-specific risk Market risk Unsystematic risk 1 points Question 10 1. Suppose a stock had an initial price of $69.81 per share, paid a dividend of $5.4 per share during the year, and had an ending share price of $98.14. What are the percentage returns? Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points Question 11 1. Suppose the returns for Stock A for last six years was 4%, 7%, 8%, -2%, 9%, and 7%. Compute the standard deviation of the returns. Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points Question 12 1. Suppose a stock had an initial price of $60.3 per share, paid a dividend of $9 per share during the year, and had an ending share price of $108.76. What are the dollar returns? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points Question 13 1. Calculate the expected returns of your portfolio Stock Invest Exp Ret A $204 8.2% B $994 14.4% C $1,210 27.6% Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 12.345% then enter as 12.35 in the answer box. Question 14 1. Suppose a stock had an initial price of $77.74 per share, paid a dividend of $8.4 per share during the year, and had an ending share price of $90.3. What are the percentage returns? Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points Question 15 1. Suppose a stock had an initial price of $65.43 per share, paid a dividend of $8.3 per share during the year, and had an ending share price of $108.54. If you own 45 shares, what are the dollar returns? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points Question 16 1. Suppose the real rate is 2.52% and the nominal rate is 11.89%. Solve for the inflation rate. Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points Question 17 1. Suppose the real rate is 3.56% and the inflation rate is 6.06%. Solve for the nominal rate. Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points Question 18 1. You own a portfolio invested 16.68% in Stock A, 11.93% in Stock B, 13.69% in Stock C, and the remainder in Stock D. The beta of these four stocks are 0.78, 0.38, 0.51, and 0.73. What is the portfolio beta? Note: Enter your answer rounded off to two decimal points. For example, if your answer is 12.345 then enter as 12.35 in the answer box. 1 points Question 19 1. You have observed the following returns on ABC’s stocks over the last five years: 3.8%, 8.8%, -5.8%, 12.7%, -3.8% What is the arithmetic average returns on the stock over this five-year period. Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points Question 20 1. You have observed the following returns on ABC’s stocks over the last five years: 4.2%, 8%, -5.5%, 13.6%, -8.4% What is the geometric average returns on the stock over this five-year period. Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points Question 21 1. Suppose the nominal rate is 10.82% and the inflation rate is 5.82%. Solve for the real rate. Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points Question 22 1. You have observed the following returns on ABC’s stocks over the last five years: 2%, 8.4%, 9%, 11.2%, 7.9% What is the geometric average returns on the stock over this five-year period. Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points Question 23 1. Suppose a stock had an initial price of $63.92 per share, paid a dividend of $5.6 per share during the year, and had an ending share price of $90.08. What are the percentage returns if you own 25 shares? Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points Question 24 1. Calculate the expected returns of your portfolio Stock Invest Exp Ret A $203 3.5% B $670 18.2% C $464 23.5% Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 12.345% then enter as 12.35 in the answer box. 1 points Question 25 1. You have observed the following returns on ABC’s stocks over the last five years: 4.5%, 9.7%, 7.5%, 12.9%, 4.9% What is the arithmetic average returns on the stock over this five-year period. Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points Question 26 1. Based on the following information, calculate the expected returns: Prob Return Recession 30% 33.1% Boom 70% 3.1% Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 12.345% then enter as 12.35 in the answer box. 1 points Question 27 1. A portfolio is invested 41.2% in Stock A, 18.8% in Stock B, and the remainder in Stock C. The expected returns are 18.6%, 33.4%, and 18.9% respectively. What is the portfolio’s expected returns? Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 12.345% then enter as 12.35 in the answer box. 1 points Question 28 1. You own a portfolio invested 22.72% in Stock A, 16.67% in Stock B, 28.63% in Stock C, and the remainder in Stock D. The beta of these four stocks are 0.65, 0.19, 0.73, and 1.39. What is the portfolio beta? Note: Enter your answer rounded off to two decimal points. For example, if your answer is 12.345 then enter as 12.35 in the answer box.