QUESTION 1

1.Four probable states of the economy may prevail next year. Below are the returns on the stocks of ABC and XYZ companies under each of the probable states and the probabilities for each state.

State of Economy

Probability

ABC Stock

XYZ Stock

Severe Recession

15.00%

10.00%

-5.00%

Mild Recession

30.00%

8.00%

-2.00%

Slow Growth

35.00%

-4.00%

11.00%

Moderate Growth

20.00%

-8.00%

22.00%

GIVEN the probabilities for the four possible economic conditions, calculate the expected return for ABC stock.(Enter your answer as a percentage, not in decimal form. E.g. 15% should be entered as 15.00 and not as 0.15)

QUESTION 2

1.Four probable states of the economy may prevail next year. Below are the returns on the stocks of ABC and XYZ companies under each of the probable states and the probabilities for each state.

State of Economy

Probability

ABC Stock

XYZ Stock

Severe Recession

15.00%

10.00%

-5.00%

Mild Recession

30.00%

8.00%

-2.00%

Slow Growth

35.00%

-4.00%

11.00%

Moderate Growth

20.00%

-8.00%

22.00%

Given the probabilities for the four possible economic conditions, calculate the expected return for XYZ stock.(Enter your answer as a percentage, not in decimal form. E.g. 15% should be entered as 15.00 and not as 0.15)

10 points

QUESTION 3

1.There are three new securities available in the market with four probable states of the economy. The following table shows the returns on these securities under each of the probable states and the probabilities for each state.

State of Economy

Probability

Security 1

Security 2

Security 3

Mild Recession

10.0%

20.00%

2.00%

-8.00%

Low Growth

40.0%

12.00%

5.00%

4.00%

Moderate Growth

40.0%

6.00%

10.00%

12.00%

Rapid Growth

10.0%

-4.00%

15.00%

22.00%

Given the probabilities for the four possible economic conditions, calculate the expected returns for security 1(Enter your answer as a percentage, not in decimal form. E.g. 15% should be entered as 15.00 and not as 0.15)

10 points

QUESTION 4

1.There are three new securities available in the market with four probable states of the economy. The following table shows the returns on these securities under each of the probable states and the probabilities for each state.

State of Economy

Probability

Security 1

Security 2

Security 3

Mild Recession

10.0%

20.00%

2.00%

-8.00%

Low Growth

40.0%

12.00%

5.00%

4.00%

Moderate Growth

40.0%

6.00%

10.00%

12.00%

Rapid Growth

10.0%

-4.00%

15.00%

22.00%

Given the probabilities for the four possible economic conditions, calculate the expected returns for security 2(Enter your answer as a percentage, not in decimal form. E.g. 15% should be entered as 15.00 and not as 0.15)

10 points

QUESTION 5

1.There are three new securities available in the market with four probable states of the economy. The following table shows the returns on these securities under each of the probable states and the probabilities for each state.

State of Economy

Probability

Security 1

Security 2

Security 3

Mild Recession

10.0%

20.00%

2.00%

-8.00%

Low Growth

40.0%

12.00%

5.00%

4.00%

Moderate Growth

40.0%

6.00%

10.00%

12.00%

Rapid Growth

10.0%

-4.00%

15.00%

22.00%

Given the probabilities for the four possible economic conditions, calculate the expected returns for security3(Enter your answer as a percentage, not in decimal form. E.g. 15% should be entered as 15.00 and not as 0.15)

QUESTION 6

1.TopFlight Corphas a beta value of2.0.If the risk free rate is 3.5% and theExpected Market Returnis 12.00%, what is the Expected/Required return on TopFlight's stock?Using the Capital Asset Pricing Model, calculate the expected / required rate of return.(Enter your answer as a percentage, not in decimal form. E.g. 15% should be entered as 15.00 and not as 0.15)

QUESTION 7

1.ABC Corphas a beta value of 1.5.If the risk free rate is 3.0% and theExpected Market Returnis 9%, what is the Expected/Required return on ABC Corp's stock?Using the Capital Asset Pricing Model, calculate the expected / required rate of return.(Enter your answer as a percentage, not in decimal form. E.g. 15% should be entered as 15.00 and not as 0.15)

QUESTION 8

1.Precept Corphas a beta value of 1.2.If the risk free rate is 2.25% and theMarket Risk Premiumis 9.25%, what is the Expected/Required return on Precept Corp's stock?Using the Capital Asset Pricing Model, calculate the expected / required rate of return.(Enter your answer as a percentage, not in decimal form. E.g. 15% should be entered as 15.00 and not as 0.15)

QUESTION 9

1.XYZ Corphas a beta value of 1.8.If the risk free rate is 4.0 and theMarket Risk Premiumis 8%, what is the Expected/Required return on XYZ Corp's stock?Using the Capital Asset Pricing Model, calculate the expected / required rate of return.(Enter your answer as a percentage, not in decimal form. E.g. 15% should be entered as 15.00 and not as 0.15)

QUESTION 10

1.Fisher Corphas a beta value of0.5.If the risk free rate is 2.5% and theMarket Risk Premiumis 11.0%, what is the Expected/Required return on Fisher Corp's stock?Using the Capital Asset Pricing Model, calculate the expected / required rate of return.(Enter your answer as a percentage, not in decimal form. E.g. 15% should be entered as 15.00 and not as 0.15)