please answer as soon as possible. This is a short assignment. Just want to make sure the answers I figured out are correct. Questions 8,9 and 11 are free response (not multiple choice) those 3 questions are the main concerns. Thank you.

Question 1 (5 points)

Consider Consider the following average annual returns for Stocks A and B and the Market. Which of the possible answers best describes the historical betas for A and B?(Hint: Notice the higher values under negative market returns)

Years	Market	Stock A	Stock B
1	0.03	0.16	0.05
2	-0.05	0.20	0.05
3	0.01	0.18	0.05
4	-0.10	0.25	0.05
5	0.06	0.14	0.05

Question 1 options:

b_A > +1; b_B = 0.

b_A = 0; b_B = -1

b_A < 0; b_B = 0

b_A < -1; b_B = 1

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Question 2 (5 points)

Which of the following statements is most correct?

Question 2 options:

If you add enough randomly selected stocks to a portfolio, you can completely eliminate all the market risk from the portfolio.

If you formed a portfolio which included a large number of low beta stocks (stocks with betas less than 1.0 but greater than -1.0), the portfolio would itself have a beta coefficient that is equal to the weighted average beta of the stocks in the portfolio, so the portfolio would have a relatively low degree of risk.

If you were restricted to investing in publicly traded common stocks, yet you wanted to minimize the riskiness of your portfolio as measured by its beta, then, according to the CAPM theory, you should invest some of your money in each stock in the market, i.e., if there were 10,000 traded stocks in the world, the least risky portfolio would include some shares in each of them.

Diversifiable risk can be eliminated by forming a large portfolio, but normally even highly diversified portfolios are subject to market risk.

Statements b and d are correct.

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Question 3 (5 points)

Which one of the following is a risk that applies to most securities?

Question 3 options:

diversifiable

total

asset-specific

unsystematic

systematic

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Question 4 (5 points)

The standard deviation of a portfolio:

Question 4 options:

must be equal to or greater than the lowest standard deviation of any single security held in the portfolio.

is a weighted average of the standard deviations of the individual securities held in the portfolio.

is an arithmetic average of the standard deviations of the individual securities which comprise the portfolio.

can be less than the standard deviation of the least risky security in the portfolio.

can never be less than the standard deviation of the most risky security in the portfolio.

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Question 5 (5 points)

Which of the following statements is CORRECT?

Question 5 options:

If the risk-free rate rises, then the market risk premium must also rise.

If a company's beta is halved, then its required return will also be halved.

If a company's beta doubles, then its required return will also double.

The slope of the security market line is equal to the market risk premium, (r_M - r_RF).

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Question 6 (5 points)

The expected return on a stock given various states of the economy is equal to the:

Question 6 options:

arithmetic average of the returns for each economic state.

summation of the individual expected rates of return.

return for the economic state with the highest probability of occurrence.

weighted average of the returns for each economic state.

highest expected return given any economic state.

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Question 7 (5 points)

The systematic (market) risk associated with an individual stock is most closely identified with the

Question 7 options:

Standard deviation of the returns on the stock.

Standard deviation of the returns on the market.

Coefficient of variation of returns on the market.

Coefficient of variation of returns on the stock.

Beta.

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Question 8 (15 points)

Calculate the return and standard deviation for the following stock, in an economy with five possible states. If a Boom (%) economy occurs, then the expected return is 50%. If a Good (%) economy occurs, then the expected return is 25%. If a Normal (%) economy occurs, then the expected return is 15%. If a Bad (%) economy occurs, then the expected return is 0%. If a Recession (%) economy occurs, then the expected return is -18%. Show your work for partial credit.

Question 8 options:

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Question 9 (10 points)

Assume that the risk-free rate is 3.9 percent, and that the market risk premium is 7.4 percent. If a stock has a required rate of return of 8.2 percent, what is its beta?

Your Answer:Question 9 options:

Answer

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Question 10 (10 points)

Megan RMegan Ross holds the following portfolio:

Stock	Investment	Beta
A	$150,000	1.40
B	50,000	0.80
C	100,000	1.00
D	75,000	1.20
Total	$375,000

What is the portfolio's beta?

Question 10 options:

1.06

1.17

1.29

1.42

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Question 11 (10 points)

Assume that the risk-free rate is 5.9 percent. If a stock has a beta of 1.3 and a required rate of return of 14.2 percent, and the market is in equilibrium, what is the return on the market portfolio? Show your answer to the nearest .1% using whole numbers (e.g., enter 14.1% as 14.1 rather than .141).

Your Answer:Question 11 options:

Answer

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Question 12 (10 points)

Consider Consider the following information and then calculate the required rate of return for the Universal Investment Fund, which holds 4 stocks. The market's required rate of return is 13.25%, the risk-free rate is 7.00%, and the Fund's assets are as follows:

Stock	Investment	Beta
A	$ 200,000	1.50
B	$ 300,000	-0.50
C	$ 500,000	1.25
D	$1,000,000	0.75

Question 12 options:

9.58%

10.09%

11.18%

11.77%

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Question 13 (10 points)

The risk-free rate of return is 3.9 percent and the market risk premium is 6.2 percent. What is the expected rate of return on a stock with a beta of 1.21?

Question 13 options:

10.92 percent

12.22 percent

11.40 percent

12.47 percent

12.79 percent