MIddle Gulf Industries stock is one and one quarter times as risky as the market on average. Given a market risk premium of 9%, and a risk-free rate of 2%, according to CAPM, what is the expected return for Middle Gulf Industries?

A) 10.75% B) 11.0% C) 13.25% D) 22.75%

Albert purchased Southern Industries stock for $40 per share and sold it one and one half years later for $45 with no dividends being paid. What was Albert's holding period return (HPR), Simple Annualized Return, and Compound Annualized Return, respectively?

A) 8.17%,8.33%,12.50% B) 8.33%, 12.50%, 8.17% C) 12.50%, 8.33%, 8.17% D) 12.50%, 8.17%, 8.33%

Consider two well-diversified portfolios: Portfolio 1 has an expected return of 8% and three-quarters average market risk while Portfolio 2 has an expected return of 12% and a beta of 1.50. If the risk free rate is 2.5% which portfolio would a rational-risk averse investor prefer and why?

A) Portfolio 2 because it has the higher reward to risk ratio. B) Portfolio 1 because it has the lower risk. C) Portfolio 2 because it has the higher reward. D) Portfolio 1 because it has the higher reward to risk ratio.

Which of the following statements is TRUE regarding CAPM?

A) This is a model for relating unsystematic risk to the expected return on a risky asset

B) Ceteris paribus, stocks with higher betas should have lower prices.

C) The beta for the market is always zero.

D) Stocks with higher market risk should have lower expected or required rates of return.

Kwak Motors preferred stock pays an annual dividend of $3.50 per share. If the stock is selling for $50 per share, what would be the annual rate of return earned of Kwak Motors preferred stock?

A) 1.43% B) 4.35% C) 7.00% D) 14.29%