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6. A stock that lies above the security market line: a. has too high of a return for the risk assumed. b. is correctly priced according to the Capital Asset Pricing Model. c. has too little risk for the return. d. is overpriced. c. is undervalued 7. Suppose a stock had an initial price of $66 per share, paid a dividend of $1.70 per share during the year, and had an ending share price of $78. What is the percentage total return? a. 18.76 percent b. 19.40 percent c. 20.76 percent d. 22.73 percent e. 25.00 percent 8. You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 19 percent, -13 percent, 16 percent, 21 percent, and 10 percent. What is the average return on Crash-n-Burn's stock over this five-year period? a. 10.60 percent b. 13.83 percent c. 16.76 percent d. 19.73 percent e. 21.00 percent 9. Following Question 8 above, what is the standard deviation of Crash-n-Burn's returns over this five-year period? a. 10.60 percent b. 13.83 percent c. 16.76 percent d. 19.73 percent e. 21.00 percent The Lingo Co is analyzing a new project which requires an initial cash outlay of $450,000 for new equipment. The flotation cost is 8.125 percent. What is the initial 10. cost of the project including the flotation costs? a. $413,438 b. $483,750 c. $486,486 d. $486,563 e. $489,796 You have a $1,000 portfolio which is invested in stocks A and B plus a risk-free asset $400 is invested in stock A. Stock A has a beta of 1.3 and stock B has a beta of .7. How much needs to be invested in stock B if you want a portfolio beta of 90? 11. a. $O b. $268.86 c. $482.86 d. $542.86 e. $600