Question
Question 1: Suppose that you hold a two asset portfolio consisting of 100 shares of Clooney Brothers at $20 per share and 200 shares of
Question 1:
Suppose that you hold a two asset portfolio consisting of 100 shares of Clooney Brothers at $20 per share and 200 shares of Marx Brothers at $40 per share. Assume that you have computed the expected return on Clooney Brothers and Marx Brothers to be 8% and 12%, respectively. What is the expected return from the portfolio?
Options:
A.
10.2%
B.
11.2%
C.
12.2%
D.
13.2%
E.
14.2%
Question 2:
Taylor, Inc., stock has a beta of 1.4 and an expected return of 13.3 percent. The risk-free rate is 3.3 percent and the expected market portfolio return is 11.2%. What is the required return on this stock? And is it overvalued or undervalued?
Options:
A. | 10.36% and undervalued | |
B. | 10.36% and overvalued | |
C. | 13.3% and exactly valued | |
D. | 14.36% and undervalued | |
E. | 14.36% and overvalued |
Question 3:
A preferred stock pays a $5.50 annual dividend. What is the maximum price you are willing to pay for one share of this stock today if your required return is 7.5 percent? If the preferred is selling for $50 in the market, should investors acquire the stock?
Options:
A.
$33.3 and should acquire
B.
$33.3 and should not acquire
C.
$50 and should acquire
D.
$73.3 and should acquire
E.
$73.3 and should not acquire
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started