Question
1. Given the following data for a stock: beta = 1.4; risk-free rate = 3%; market rate of return = 13%; and expected rate of
1. Given the following data for a stock: beta = 1.4; risk-free rate = 3%; market rate of return = 13%; and expected rate of return on the stock = 18%. Then the stock is: A)on the Security Market Line
B)above the Security Market Line
C)below the Security Market Line
D)it cannot be determined
2.You own a portfolio of two stocks, A and B. Stock A is valued at $2,000 and has an expected return of 10.5 percent. Stock B has an expected return of 14.7 percent. What is the expected return on the portfolio if the portfolio value is $5,000?
A)12.03 percent | ||
B) | 11.73 percent | |
C) | 10.92 percent | |
D) | 13.02 percent |
3.
A stock has a beta of 1.4, an expected return of 17.2 percent, and lies on the security market line. A risk-free asset is yielding 3.2 percent. You want to create a portfolio that is comprised of the stock and the risk free and will have a portfolio beta of 0.8. What is the expected return on this portfolio?
A) | 11.20 percent | |
B) | 10.41 percent | |
C) | 12.33 percent | |
D) | 13.87 percent |
4.
You would like to invest $20,000 and have a portfolio expected return of 10 percent. You are considering two securities, A and B. A has an expected return of 16 percent and B has an expected return of 8 percent. How much should you invest in stock A if you invest the balance in stock B to achieve the 10 percent portfolio return?
A)$4,500 | ||
B)$6,250 | ||
C)$5,000 | ||
D)$7,000 |
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