A stock has an expected return of 15 percent, its beta is 1.25, and the expected return on the market is 13 percent. What must the risk-free rate be? (Do not round your intermediate calculations.)

Multiple Choice

• 5.20%

• 4.75%

• -1.25%

• 5.00%

• 5.25%

ou want to create a portfolio equally as risky as the market, and you have $1,500,000 to invest. Consider the following information:

Asset	Investment	Beta
Stock A	$300,000	0.75
Stock B	$450,000	1.25
Stock C		1.50
Risk-free asset

Required:

(a)	What is the investment in Stock C? (Do not round your intermediate calculations.)
	(Click to select) $291,667 $456,000 $451,250 $475,000 $494,000

(b)	What is the investment in risk-free asset? (Do not round your intermediate calculations.)
	(Click to select) $458,333 $286,000 $275,000 $261,250 $264,000

ou have $30,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 15 percent and Stock Y with an expected return of 6 percent.

Required:

(a)	If your goal is to create a portfolio with an expected return of 11.8 percent, how much money will you invest in Stock X?
	(Click to select) $20,106 $18,366 $20,300 $19,333 $39,333

(b)	If your goal is to create a portfolio with an expected return of 11.8 percent, how much money will you invest in Stock Y?
	(Click to select) $10,667 $10,240 $11,094 $11,200 $10,134

A portfolio is invested 20 percent in Stock G, 65 percent in Stock J, and 15 percent in Stock K. The expected returns on these stocks are 8 percent, 16 percent, and 29 percent, respectively. What is the portfolio's expected return?

Multiple Choice

• 14.13%

• 15.53%

• 16.35%

• 17.00%

• 17.17%

You own a portfolio equally invested in a riskfree asset and two stocks. If one of the stocks has a beta of 1.05 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?

Multiple Choice

• 1.00

• 2.05

• 0.95

• 1.95

• 1.85

Consider the following information:

		Rate of Return if State Occurs
State of Economy	Probability of State of Economy	Stock A	Stock B
Recession	0.10	0.05	-0.18
Normal	0.50	0.08	0.14
Boom	0.40	0.13	0.35

Required:

(a)	Calculate the expected return for Stock A. (Do not round your intermediate calculations.)
	(Click to select) 8.69% 8.62% 10.19% 10.09% 9.70%

(b)	Calculate the expected return for Stock B. (Do not round your intermediate calculations.)
	(Click to select) 18.24% 19.97% 20.16% 19.20% 10.33%

(c)	Calculate the standard deviation for Stock A. (Do not round your intermediate calculations.)
	(Click to select) 2.83% 2.94% 2.00% 2.97% 2.69%

(d)	Calculate the standard deviation for Stock B. (Do not round your intermediate calculations.)
	(Click to select) 11.22% 16.50% 16.66% 15.87% 15.07%

You own a stock portfolio invested 25 percent in Stock Q, 25 percent in Stock R, 5 percent in Stock S, and 45 percent in Stock T. The betas for these four stocks are 1.8, 1.22, 0.84, and 1.73, respectively. What is the portfolio beta?

Multiple Choice

• 1.61

• 1.65

• 1.54

• 1.58

• 1.5