37. If the risk-free rate is 7 percent, the expected return on the market is 10 percent, and the expected return on Security L is 13 percent, what is the beta of Security L? a. 1.0 b. 1.5 c. 2.0 d. 2.5 e. 3.0 38. If a group of securities are correctly priced, then the reward-to-risk ratio: a. for the entire group must equal 1.0. b. for each security must equal 1.0. c. for each security must equal 0 d. is equal for each security e. of the combined group is equal to that of a risk-free security. 39. The 9 percent annual coupon bonds of the Lennway Inc. are selling for $1,008.20. The bonds have a face value of $1,000 and mature in 11 years. What is the yield to maturity? a. 8.76 percent b. 8.82 percent c. 8.88 percent d. 9.03 percent e. 9.18 percent 40. You have just received a prize worth $150. You deposited your winnings into an account which pays 6 percent interest compounded monthly. How long will you have to wait until your winnings are worth $250? a. 98.72 months b. 99.51 months c. 102.42 months d. 105.20 months e. 106.38 months 41. Stock A has a beta of 1.5 and Stock B has a beta of 0.5. Which of the following statements must be true about these securities? (Assume the market is in equilibrium.) a. When held in isolation, Stock A has greater risk than Stock B b. Stock B would be a more desirable addition to a portfolio than Stock A. c. Stock A would be a more desirable addition to a portfolio than Stock B. d. The expected return on Stock A will be greater than that on Stock B. e. The expected return on Stock B will be greater than that on Stock A. Page 9 of 13