Question
Data: The risk-free rate is 4.2 percent. The Business Finance Development fund has a rate of return of 13 percent with all money invested in
Data: The risk-free rate is 4.2 percent. The Business Finance Development fund has a rate of return of 13 percent with all money invested in 4 stocks as shown below:
| Stock | Amount invested | Stock beta |
| A | 125,000 | 1.2 |
| B | 75,000 | 1.3 |
| C | 175,000 | 1.4 |
| D | 225,000 | 1.5 |
Question 1: What is the beta of the portfolio?
| 1.38 | ||
| 1.42 | ||
| 1.59 | ||
| 1.47 | ||
| 1.34
|
QUESTION 2
-
What is the market risk premium?
8.62%
10.56%
5.68%
4.20%
6.36%
QUESTION 3
-
If the fund manager sells all of stock A and invests all of the proceeds in stock E with a beta of 1.6, what will be percent change in the beta of the portfolio?
8.56%
5.68%
7.21%
4.20%
6.02%
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
324664559, 978-0324664553
