Question 1

Security A has expected return of 17.6% and beta of 1.4. If the risk-free rate is 6%, what is the reward-to-risk rate for Security A?

Enter your answer as a percentage rounded off to two decimal points. Do not enter % in the answer box.

Question 2

The common stock of Detroit Engines has a beta of 1.3 and expected returns of 14.44 percent. The risk-free rate is 4.43 percent. What is the expected return on the market?

Hint: Use the CAPM equation to get the answer.

Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

Question 3

Security A has expected return of 14% and beta of 1.60. Security B has expected return of 10% and beta of 0.80. What would hte risk-free rate have to be for the two stocks to be correctly priced relative to each other?

Enter your answer as percentage rounded off to two decimal points. Do not enter % in the answer box.

Question 4

You own a portfolio invested 14.31% in Stock A, 19.64% in Stock B, 20.71% in Stock C, and the remainder in Stock D. The beta of these four stocks are 1.31, 0.2, 0.99, and 1. What is the portfolio beta?

Note: Enter your answer rounded off to two decimal points. For example, if your answer is 12.345 then enter as 12.35 in the answer box.

Question 5

Suppose you have a portfolio where you have invested $9882 in Stock A and Stock B. Stock A has an expected return of 14.2% and Stock B has an expected return of 4.1%. If your goal is to create a portfolio with an expected return of 10.7%, what is your dollar investment in Stock A?

Note: Enter your answer rounded off to two decimal points. Do not enter $ in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

Question 6

Portfolio diversification eliminates which one of the following?

Market risk

Reward for bearing risk

Portfolio risk premium

Unsystematic risk

Total investment ris

Question 7

A portfolio is invested 31.1% in Stock A, 16.5% in Stock B, and the remainder in Stock C. The expected returns are 18.8%, 30.7%, and 9.2% respectively. What is the portfolio's expected returns?

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 12.345% then enter as 12.35 in the answer box.

Question 8

The common stock of Detroit Engines has a beta of 1.8 and expected returns of 14.4 percent. The risk-free rate is 4.81 percent. What is the expected return on the market?

Hint: Use the CAPM equation to get the answer.

Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

Question 9

If the expected return on Stock A is 13.46% and the return on the market is 7%. What is the beta for Stock A if the risk-free rate is 3%?

Hint: Use the CAPM equation to get the answer.

Enter your answer in percentages rounded off to two decimal points. D0 not enter % in the answer box.

Question 10

Suppose your portfolio consists of Stock A and Stock B. Stock A has an expected return of 16.3% and Stock B has an expected return of 6.7%. If your goal is to create a portfolio with an expected return of 8.8%, what is your weight in Stock A?

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 12.345% then enter as 12.35 in the answer box.

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Question 11

Given the investment in Stocks A, B, and C, compute the portfolio beta. Enter your answer rounded off to two decimal points

Stock	Investment	Beta
A	$1800	1.44
B	$2400	1.58
C	$3400	0.92

Question 12

Given the investment in Stocks A, B, and C, compute the expected return on the portfolio. Enter your answer in percentages, rounded off to two decimal points. Do not enter % in the answer box.

Stock	Investment	Exp Returns
A	$1500	8%
B	$2000	4%
C	$2500	-2%

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Question 13

The common stock of Detroit Engines has a beta of 1.84. The expected return on the market is 11 percent and the risk-free rate is 3 percent. What is the firms expected return, E(Ri)?

Hint: Use the CAPM equation to get the answer.

Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

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Question 14

A portfolio contains 161 shares of Stock A that sell for $42 each, 306 shares of Stock B that sell for $95 each and 55 shares of Stock C that sell for $61 each. What is the portfolio expected return if the expected returns on these stocks is 14.9%, 11.1%, and 7.9% respectively?

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 12.345% then enter as 12.35 in the answer box.

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Question 15

The common stock of Detroit Engines has a beta of 1.54 and expected returns of 14.54 percent. The expected return on the market is 3.31 percent. What is the risk-free rate?

Hint: Use the CAPM equation to get the answer.

Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

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Question 16

Suppose your portfolio consists of Stock A and Stock B. Stock A has an expected return of 18.5% and Stock B has an expected return of 4.2%. If your goal is to create a portfolio with an expected return of 12.6%, what is your weight in Stock B?

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 12.345% then enter as 12.35 in the answer box.

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Question 17

You want a portfolio as risky as the market. Given the information below, compute the weight of the risk-free asset.

Enter your answer in percentages, rounded off to two decimal points. Do not enter % in the answer box.

Asset	Investment	Beta
Stock A	40.00%	1.4
Stock B	25.00%	0.9
Stock C	?	2.25
Risk-free asset	?	?

Question 18

Given the data below, compute the standard deviation for stock A. Enter your answer in percentages rounded off to two decimal points.Do not enter % in the answer box.

Event	Probability	Returns
Pessimistic	30%	12%
Most Likely	45%	-15%
Optimistic	25%	5%

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Question 19

Stock A has a beta of 0.5. The risk-free asset has a beta of zero. The portfolio of these two securities has a beta of 0.8, what is the weight of Stock A in the portfolio?

Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

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Question 20

Suppose you have a portfolio where you have invested $15515 in Stock A and Stock B. Stock A has an expected return of 19.6% and Stock B has an expected return of 6.3%. If your goal is to create a portfolio with an expected return of 10.1%, what is your dollar investment in Stock B?

Note: Enter your answer rounded off to two decimal points. Do not enter $ in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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Question 21

Given the data below, compute the standard deviation for stock A. Enter your answer in percentages rounded off to two decimal points.Do not enter % in the answer box.

Event	Probability	Returns
Pessimistic	25%	13%
Most Likely	50%	15%
Optimistic	25%	17%

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Question 22

Stock Y has an expected return of 14% and beta of 1.80. Stock Z has an expected return of 11.50% and beta of 1.10. If the risk-free rate is 3.5% and the market risk premium is 6.5%, which security is overvalued?

Stock Y, because it plots below the SML

Stock Z, because it plots below the SML

Stock Z, because it plots above the SML

Stock Y, because it plots above the SML

No answer text provided.

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Question 23

ABC Inc.'s stock has a 40% chance of producing a 8.6% return, a 25% chance of producing a 11.2% return, and a 35% chance of producing a 21.7% return. What is ABC Inc's expected return? Enter your answer in percentages rounded off to two decimal points. Do not type % in the answer box.

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Question 24

The common stock of ABC has a beta of 1.22. The market risk premium is 10.7 percent and the risk-free rate is 3.1 percent. What is the firms expected return, E(Ri)?

Hint: Use the CAPM equation to get the answer.

Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

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Question 25

You own a portfolio invested 28.44% in Stock A, 14.81% in Stock B, 27.19% in Stock C, and the remainder in Stock D. The beta of these four stocks are 0.78, 1.14, 0.34, and 1.04. What is the portfolio beta?

Note: Enter your answer rounded off to two decimal points. For example, if your answer is 12.345 then enter as 12.35 in the answer box.

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Question 26

Given the data below, compute the standard deviation for stock B. Enter your answer in percentages rounded off to two decimal points.Do not enter % in the answer box.

Event	Probability	Returns
Pessimistic	25%	7%
Most Likely	50%	15%
Optimistic	25%	23%

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Question 27

Calculate the expected returns of your portfolio

Stock	Invest	Exp Ret
A	$301	2.6%
B	$649	19.9%
C	$497	28%

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 12.345% then enter as 12.35 in the answer box.

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Question 28

You have invested 29% in Stock A, 33.2% in Stock B, and the remainder in the risk free asset. You want a portfolio to be as risky as the market (i.e. you want the beta of your portfolio to equal 1). If Stock A has beta of 0.7, what is the beta of Stock B?

Note: Enter your answer rounded off to two decimal points. For example, if your answer is 12.345 then enter as 12.35 in the answer box.