F310 - Chapter 1200 R o und 1. You buy a share of stock for $28.08. Immediately after receiving a dividend of $3.08 one year from today, you immediately sell your share of stock for $27.39. What was your realized return from holding the stock? n on si ovo ovo ( Morogo 2. You purchased Alpha Innovative Inc. stock at a price of $25 per share. Its price was $15 after six months and the company declared bankruptcy at the end of the next six months. What was the realized return over the last year? 3. You invested $100 in a portfolio of small stocks in 1925. After 90 years, the portfolio value is equal to $3,562,679. What is the geometric average return (i.e., the average annual compound return)? 4. The average annual return for the S&P 500 from 1886 to 2006 is 5%, with a standard deviation of 15%. Based on these numbers, what is a 95% confidence interval for 2007's returns? P stavba8 2 10 . Ved to obmov.Do moto bold siniblod moramo bacily owW 5. You expect General Motors (GM) to have a beta of 1.3 over the next year and the beta of Exxon Mobil (XOM) to be 0.9 over the next year. Also, you expect the volatility of General Motors to be 40% and that of Exxon Mobil to be 30% over the next year. Which stock has more systematic risk? Which stock has more total risk? 6. Your estimate of the market risk premium is 7%. The risk-free rate of return is 4%, and General Motors has a beta of 1.4. According to the Capital Asset Pricing Model (CAPM), what is GM's risk premium? 7. Fremont Enterprises has an expected return of 18% and Laure expected return of 21%. If you put 46% of your portfolio in Laurelhurst in Fremont, what is the expected return of your portfolio? m your portfolio in Laurelhurst and 54% 8. Given $100,000 to invest, construct a value-weighted portfolio of the four stocks listed below: lebo Stockmust by Price per Share Nbr. of shares Den o ilo to ($) b outstanding (Mill.) Golden Seas MA 13 boonsbol 10 bobo Jacobs and Jacobs 22 1.25 MAG 43 43 30 PDJB 5 10 9. You hear the news that the S&P 500 was down 2% today relative to the risk-free rate (the market's excess return was -2%). If Zynga's beta is 1.4 and has a standard deviation of 30%, what is your best guess as to Zynga's excess return today? boden ilointog bio v ideo on 000.0012 novio 10. Suppose Autodesk stock has a beta of 2.16, whereas Costco stock has a beta of 0.69. If the risk-free interest rate is 4% and the expected return of the market portfolio is 10%, what is the expected return of a portfolio that consists of 60% Autodesk stock and 40% Costco stock, according to the CAPM? DAM 11. Suppose Intel stock has a beta of 1.6 whereas Boeing stock has a beta of 1. What is the beta of a portfolio that consists of 60% Intel stock and 40% Boing stock Hint: Bp = wifi+w2B2+...+wnBn 12. You are analyzing a stock that has a beta of 0.8. The risk free rate of return is 5% and you estimate the market risk premium to be 6%. If you expect the stock to have a return of 11% over the next year, should you buy it? Why or why not
