1. What is the expected standard deviation of the returns of a portfolio that is invested 25 percent in Stock A, 40 percent in Stock B, and the remainder invested in Stock C? (Hint: create a column showing the distribution of returns for the portfolio. Then, find the portfolio's expected return and variance as normally done for a single asset.)

State of Economy			Probability		Return of A	Return of B	Return of C
Boom			0.20		29%	15%	6%
Normal			0.50		11%	12%	13%
Slow Down			0.20		0%	8%	25%
Recession					-10%	5%	30%
	A.	3.21 percent
	B.	1.55 percent
	C.	7.69 percent
	D.	11.71 percent

2.

The returns on the common stock of New Image Products are quite cyclical. In a boom economy, the stock is expected to return 46 percent in comparison to 16 percent in a normal economy and a negative 28 percent in a recessionary period. The probability of a recession is 25 percent while the probability of a boom is 30 percent. What is the standard deviation of the returns on this stock?

	A.	21.42 percent
	B.	27.39 percent
	C.	38.11 percent
	D.	32.48 percent
		3.

The outstanding bonds of Tech Express are priced at $1,092 and mature in 10 years. These bonds have a face value of $1,000, a coupon rate of 7.68 percent, and pay interest annually. The firm's tax rate is 21 percent. What is the firm's after tax cost of debt?

	A.	5.06 percent
	B.	7.68 percent
	C.	4.81 percent
	D.	6.40 percent
		4.

The Timken Company has announced a rights offer to raise $18 million for a new journal. The stock currently sells for $51 per share and there are 2.4 million shares outstanding. The subscription price is set at $45 per share. What is the ex-rights price per share?

	A.	$50.14
	B.	$58.12
	C.	$53.72
	D.	$48.17