Skyline University College MBA Program Financial Management Fall 2017 Class Participation- 10 marks Name: Note: write the formula for all your answers and show all the calculations. Question 1: (5 marks) Consider the following information about three stocks: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Stock C Boom 0.35 0.24 0.36 0.55 Normal 0.50 0.17 0.13 0.09 Bust 0.15 0.00 - 0.28 - 0.45 1. If your portfolio is invested 40 percent each in stock A and B and 20 percent in stock C, calculate the following: a. The portfolio expected return? b. The portfolio Standard Deviation. 2. If the expected T-bill (risk free) rate is 3.8 percent, what is the expected risk premium on the portfolio? Question 2: (5 marks) Given the following information for Even-flow Power Co: Debt: 8,000 6.5 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 92 percent of par; the bonds make semiannual payments. Common Stock: 250,000 shares outstanding, selling for $27 per share, the beta is 1.05. Preferred Stock: 15,000 shares of 5 percent preferred stock outstanding, currently selling for $93 per share Market: 8 percent market risk premium and 4.5 percent risk-free rate. Calculate the Weighted Average Cost of Capital (WACC), assuming the companys tax rate is 35 percent. plz help me to find answers for questions