1. What is the Beta of this 3-stock portfolio based on the information in the table above?

1. 0.72
2. 1.00
3. 1.03
4. 1.07
5. 1.10

2. Based on the 2 graphs of the historical returns above, which stock must have larger Beta: CAT or CVX?

1. 1. CAT
   2. CVX
   3. S&P 500
   4. Cannot tell based on the information provided

3. The expected return on the market portfolio is 15%. The risk-free rate is 8%. The return on SDA Corp. common stock turned to be 16%. The beta of SDA Corp. common stock is 1.25. Within the context of the capital asset pricing model, _________.

A. SDA Corp. stock is underpriced B. SDA Corp. stock is fairly priced C. SDA Corp. stock's alpha is -0.75% D. SDA Corp. stock alpha is 0.75%

4. What is the Jensen alpha measure for the portfolio based on the following information:

R_portfolio = 16%

St. Dev. _portfolio = 22%

Beta_portfolio = 1.32

T-Bills Rate = 4%

R_Market = 12%

St.Dev._Market = 31%

1. 0
2. 1.4%
3. 12%
4. -4%

5. What is the expected return on a stock with a beta of 0.8, given a risk free rate of 3.5% and an expected market return of 15.5%?

A. 3.8% B. 13.1% C. 15.6% D. 19.1%

6. What is the Beta of HDI stock?

1. 0.78
2. 1.11
3. 1.58
4. Cannot tell 7. Write out CAPM equation based on historical data for the above portfolio.
5. R_i = 0.6 + 3.1 ( ?_i )
6. R_i = 0.6 + Beta_i (1.00)
7. R_i = 0.6 + Beta_i (1.50 ? 0.6)
8. R_i = 0.6 - Beta_i (3.1 ? 0.6) 8. What is the slope of the SML based on the CAPM equation above?
9. Beta
10. 1.00
11. 0.90
12. 1.50

Ch. 7 - 10 points total (1.25 points each problem) 1. What is the Beta of this 3-stock portfolio based on the information in the table above? A. B. C. D. E. 0.72 1.00 1.03 1.07 1.10 2. Based on the 2 graphs of the historical returns above, which stock must have larger Beta: CAT or CVX? A. B. C. D. CAT CVX S&P 500 Cannot tell based on the information provided 3. The expected return on the market portfolio is 15%. The risk-free rate is 8%. The return on SDA Corp. common stock turned to be 16%. The beta of SDA Corp. common stock is 1.25. Within the context of the capital asset pricing model, _________. A. SDA Corp. stock is underpriced B. SDA Corp. stock is fairly priced C. SDA Corp. stock's alpha is -0.75% D. SDA Corp. stock alpha is 0.75% 4. What is the Jensen alpha measure for the portfolio based on the following information: Rportfolio = 16% St. Dev. portfolio = 22% Betaportfolio = 1.32 T-Bills Rate = 4% RMarket = 12% St.Dev.Market = 31% A. B. C. D. 0 1.4% 12% -4% 5. What is the expected return on a stock with a beta of 0.8, given a risk free rate of 3.5% and an expected market return of 15.5%? A. 3.8% B. 13.1% C. 15.6% D. 19.1% 6. What is the Beta of HDI stock? A. B. C. D. 0.78 1.11 1.58 Cannot tell 7. Write out CAPM equation based on historical data for the above portfolio. A. B. C. D. Ri = 0.6 + 3.1 ( i ) Ri = 0.6 + Betai (1.00) Ri = 0.6 + Betai (1.50 - 0.6) Ri = 0.6 - Betai (3.1 - 0.6) 8. What is the slope of the SML based on the CAPM equation above? A. Beta B. 1.00 C. 0.90 D. 1.50