QUESTION 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)

10 points

QUESTION 2

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

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

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

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 3 (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 6

Premier Corp has a beta value of 1.0. If the risk free rate is 2.75% and the Expected Market Return is 12.25%, what is the Expected/Required return on Premiers 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)

10 points

QUESTION 7

FSD Corp has a beta value of 1.6. If the risk free rate is 3.25% and the Market Risk Premium is 11.5%, what is the Expected/Required return on FSD Corps 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)

10 points

QUESTION 8

TopFlight Corp has a beta value of 2.0. If the risk free rate is 3.5% and the Expected Market Return is 12.00%, what is the Expected/Required return on TopFlights 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)

10 points

QUESTION 9

Acme Corp has a beta value of 0.75. If the risk free rate is 2.5% and the Expected Market Return is 12.5%, what is the Expected/Required return on Acmes 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)

10 points

QUESTION 10

Precept Corp has a beta value of 1.2. If the risk free rate is 2.25% and the Market Risk Premium is 9.25%, what is the Expected/Required return on Precept Corps 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)