Part 1:

A portfolio is comprised of the following stocks. What is the portfolio beta?

Stock	Market Value of Shares			Beta
A	$	28,000		2.49
B	$	24,500		1.26
C	$	11,400		1.30

1.81

1.96

1.88

1.69

Part 2:

What is the expected rate of return on a stock that has a beta of 1.61 if the market risk premium is 9.3 percent and the risk-free rate is 4.6 percent?

17.71 percent

18.64 percent

15.56 percent

19.57 percent

Part 3:

You own a $24,000 portfolio that is invested in a risk-free security and Stock A. The beta of Stock A is 2.07 and the portfolio beta is 1.00. What is the amount of the investment in Stock A?

$8,954

$11,594

$12,414

$14,154

Part 3:

Preston Industries has a WACC of 12.48 percent. The capital structure consists of 61.4 percent equity and 36.4 percent debt. The aftertax cost of debt is 6.9 percent and the cost of equity is 15.60 percent. What is the cost of preferred stock?

17.73 percent

19.93 percent

20.63 percent

21.83 percent