1) Bond X is noncallable and has 20 years to maturity, a 7% annual coupon, and a $1,000 par value. Your required return on Bond X is 10%; if you buy it, you plan to hold it for 5 years. You (and the market) have expectations that in 5 years, the yield to maturity on a 15-year bond with similar risk will be 12%. How much should you be willing to pay for Bond X today? (Hint: You will need to know how much the bond will be worth at the end of 5 years.) Do not round intermediate calculations. Round your answer to the nearest cent.

2) Last year Janet purchased a $1,000 face value corporate bond with an 9% annual coupon rate and a 10-year maturity. At the time of the purchase, it had an expected yield to maturity of 7.54%. If Janet sold the bond today for $1,030.65, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places.

3)

A stock has a required return of 13%; the risk-free rate is 5%; and the market risk premium is 3%.

1. What is the stock's beta? Round your answer to two decimal places.
2. If the market risk premium increased to 10%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged.
   1. If the stock's beta is greater than 1.0, then the change in required rate of return will be greater than the change in the market risk premium.
   2. If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium.
   3. If the stock's beta is greater than 1.0, then the change in required rate of return will be less than the change in the market risk premium.
   4. If the stock's beta is equal to 1.0, then the change in required rate of return will be greater than the change in the market risk premium.
   5. If the stock's beta is equal to 1.0, then the change in required rate of return will be less than the change in the market risk premium.
   -Select New stock's required rate of return will be? Round your answer to two decimal places.

4)

tocks A and B have the following probability distributions of expected future returns:

Probability	A	B
0.1	(8%)	(36%)
0.3	3	0
0.3	12	20
0.2	18	25
0.1	33	48

1. Calculate the expected rate of return, r_B, for Stock B (r_A = 10.60%.) Do not round intermediate calculations. Round your answer to two decimal places

2. Calculate the standard deviation of expected returns, _A, for Stock A (_B = 21.36%.) Do not round intermediate calculations. Round your answer to two decimal places

3. Now calculate the coefficient of variation for Stock B. Round your answer to two decimal places

4. Is it possible that most investors might regard Stock B as being less risky than Stock A?

5. If Stock B is more highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be less risky in a portfolio sense.

6. ----If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.
7. ----If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense
8. ----if Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sens
9. -----If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense.

5)

Suppose you are the money manager of a $4.68 million investment fund. The fund consists of four stocks with the following investments and betas:

Stock	Investment	Beta
A	$ 200,000	1.50
B	300,000	(0.50)
C	1,180,000	1.25
D	3,000,000	0.75

If the market's required rate of return is 9% and the risk-free rate is 7%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places.

6) Given the following information, determine the beta coefficient for Stock L that is consistent with equilibrium: = 8%; r_RF = 6.45%; r_M = 13%. Round your answer to two decimal places.