7. If an investor holds the following portfolio, what is the portfolio's beta? Stock Investment Beta A $50,000 1.4 50,000 0.8 50,000 D 50,000 1.2 Total $200.000 a) 1.5 b) 1.1. C) 1.7 d) 1.3 8. Assume that you manage a $10 million mutual fund that has a beta of 1.05 and a 9.5% required return. The risk-free rate is 4.2%. You now receive another $5 million, which you invest in stocks with an average beta of 0.65. What is the required rate of return on the new portfolio? a) 8.83% b) 8.45% c) 9.83% d) 6.45% 9. Given the following probability distribution, what are the expected return, the standard deviation and the coefficient of variation for Security F? State Pi 1 0.2 2 0.6 3 0.2 a) 14%; 3.16%; 0.1 b) 13%; 4.12%; 0.1 c) 15%; 3.16%; 0.210 d) 15%; 4.12%; 0.210 10% 15 20 10. Assume that you manage a $10 million mutual fund that has a beta of 1.05 and a 9.5% required return. The risk- free rate is 4.2%. You now receive another $5 million, which you invest in stocks with an average beta of 0.65. What is the required rate of return on the new portfolio? a) 8.83% b) 9.05% c) 9.27% d) 9.51% 11. What is the dividend yield of a stock that currently sells for $35 and pays a dividend of $10? a) 3.5 b) 0.285 c) 28.5 d) 0.35 12. How much are you willing to pay for one share of Levine stock if the company just paid a $1.5 annual dividend, the dividends increase by 3% annually, and you require a 15% rate of return? a) $12.5 b) $10 c) $12.88 d) $13 13. Savickas Petroleum's stock has a required return of 12%, and the stock sells for $40 per share. The firm just paid a dividend of $1, and the dividendis expected to grow by 30% per year for the next 4 years, so D4 = $1(1.30)4 = $2.8561. After t = 4, the dividend is expected to grow at a constant rate of X% per year forever. What is the stock's expected constant growth rate after t = 4, i.e., what is X? a) 5.17% b) 5.44% c) 5.72% d) 6.34% 14. Company X offers a common stock that pays an annual dividend of $3 a share. The company has promised to maintain a constant dividend. How much are you willing to pay for one share of this stock if you want to earn a 10% return on your investment? a) $33 b) $32 c) $30 d) None of the above 15. The common stock of Bruner Aeronautics sells for $80 a share. The stock expects to pay $2 per share next month when the annual dividend is distributed. The company has established a pattern of increasing their dividends by 2% annually. What is the market rate of return on this stock? a) 4.5% b) 2.5% c) 2% d) 4% 16. A stock is expected to pay a dividend of $1.5 at the end of the year. The required rate of return is rs = 10%, and the expected constant growth rate is g = 7%. What is the stock's current price? a) $50 b) $45 c) $36 d) $50.5 17. Fred Enterprises' stock currently sells for $40per share. The dividendis projected to increase at a constant rate of 6% per year. The required rate of return on the stock, ss. is 9.50%. What is the stock's expected price 3 years from today? a) $47.64 b) $40 c) $37.64 d) $46 18. Dell Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $8.5 per share. If the required return on this preferred stock is 7.5%, at what price should the stock sell? a) $106.67 b) $106 c) $105 d) $103 19. Ralph Industries just paid a dividend of DO = $1.5. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this low-risk stock is 9%. What is the best estimate of the stock's current market value? a) $50.20 b) $50.98 c) $60.98 d) $45.80 20. Spinneys Company's last dividend was $1.25. The dividend growth rate is expected to be constant at 15% for 3 years, after which dividends are expected to grow at a rate of 6% forever. If the firm's required return (s) is 11%, what is its current stock price? a) $42.60 b) $40.64 c) $42.64 d) $45.80