21. Christy is considering investing in the common stock of One Liberty and Heico. The following data are available for these two securities:

	One Liberty	Heico
Expected return	.12	.16
Standard deviation of returns	.08	.20

If she invests 30% of her funds in Heico and 70% in One Liberty, and if the correlation of returns between these securities is +0.65, what is the portfolio's standard deviation? (Points : 3)

15.67% 9.44% 10.54% 9.67%

Question 22.22. Phoenix Company common stock is currently selling for $20 per share. Security analysts at Smith Blarney have assigned the following probability distribution to the price of (and rate of return on) Phoenix stock one year from now:

Price	Rate of Return	Probability
$16	-20%	0.25
20	0%	0.30
24	+20%	0.25
28	+40%	0.20

Assuming that Phoenix is not expected to pay any dividends during the coming year, determine the expected rate of return on Phoenix Stock. (Points : 3)

8% 0% 10% 40%

Question 23.23. Phoenix Company common stock is currently selling for $20 per share. Security analysts at Smith Blarney have assigned the following probability distribution to the price of (and rate of return on) Phoenix stock one year from now:

Price	Rate of Return	Probability
$16	-20%	0.25
20	0%	0.30
24	+20%	0.25
28	+40%	0.20

Assuming that Phoenix is not expected to pay any dividends during the coming year, determine the coefficient of variation for the rate of return on Phoenix stock. (Points : 3)

0.0 2.68 2.61 0.275

Question 24.24. Calculate the after-tax cost of preferred stock for Ohio Valley Power Company, which is planning to sell $100 million of $3.25 cumulative preferred stock to the public at a price of $25 per share. Flotation costs are $1.00 per share. Ohio Valley has a marginal income tax rate of 40%. (Points : 3)

13.0% 7.8% 8.12% 13.54%