Question 1 (1 point)

Given the following probability distribution of returns:

Probability	Return
0.1	-15.0%
0.25	0.0%
0.3	8.5%
0.25	12.0%
0.1	32.0%

What is the expected return?

Question 1 options:

	7.25%
	7.38%
	7.50%
	9.90%

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Question 2 (1 point)

Stocks A and B have the following probability distributions of expected future returns:

Probability	A	B
0.1	(20%)	(46%)
0.2	7	0
0.4	15	15
0.2	23	30
0.1	47	50

Calculate the standard deviation of returns for Stock A.

Question 2 options:

	15.82%
	24.04%
	28.04%
	32.04%

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Question 3 (1 point)

Assume that the risk-free rate is 4.75% and the market risk premium is 5.25%.

What is the expected return for the overall stock market (r_M) ?

(Answer as a percent with 2 decimal places. For example, 10 percent should be entered as 10.00. Donot use the % sign.)

Your Answer:Question 3 options:

Answer

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Question 4 (1 point)

A stock has a required return of 14%, the risk-free rate is 9%, and the market risk premium is 3%.

What is the stock's beta?

(Express your answer to two decimal places. i.e. ten is entered as 10.00)

Your Answer:Question 4 options:

Answer

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Question 5 (1 point)

Investors expect a 3.5% rate of inflation in the future. The real risk-free rate is 2.0%, and the market risk premium is 6.0%. Isbell Enterprises has a beta of 1.0.

Calculate the required rate of return for Isbell Enterprises.

(Answer as a percent with 2 decimal places. For example, 10 percent should be entered as 10.00. Donot use the % sign.)

Your Answer:Question 5 options:

Answer

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Question 6 (1 point)

Assume that the risk-free rate is 6.0% and the market risk premium is 8.0%.

What is the required rate of return on a stock with a beta of 1.0?

(Answer as a percent with 2 decimal places. For example, 10 percent should be entered as 10.00. Do not use the % sign.)

Your Answer:Question 6 options:

Answer

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Question 7 (1 point)

An individual has $31000 invested in Stock A with a beta of 0.6 and another $41000 invested in Stock B with a beta of 1.1.

If these are the only two investments in her portfolio, what is her portfolio's beta?

(Express your answer to two decimal places. i.e. a beta of one is entered as 1.00).

Your Answer:Question 7 options:

Answer

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Question 8 (1 point)

Suppose you are the money manager of a $4 million investment fund. The fund consists of four stocks with the following investments and betas:

Stock	Investment	Beta
A	$300,000	1.25
B	700,000	(0.75)
C	1,500,000	1.00
D	1,500,000	0.75

If the market's return in 12% and the risk-free rate is 5%, what is the fund's required rate of return (You must calculate the fund's beta, then its required rate of return).

Question 8 options:

	0.62
	0.88
	9.33%
	10.76%