Standard Deviation Beta Security X Security Y Security Z 0.35 1.45 0.28 1.06 11. Which of the following statements is most correct? A) Security Z has the greatest return because it has the largest standard deviation. D) Security X has the greatest total risk because it has the largest beta. O Security X has the greatest diversifiable risk because it has the largest beta. D) Security Y has the lowest total return because it has the lowest beta. 0.44 1.22 12. A firm has a cost of preferred stock 8%, and its yield to maturity is 10%. This firm has a tax rate of 35%. Given these information, which financing is cheaper for the firm: debt or preferred stock A) Debt B) Preferred stock C) Same 13. A portfolio has an expected return of 12.3 percent. This portfolio contains two stocks and one risk-free security. The expected return on stock X is 9.7 percent and on stock Y it is 17.7 percent. The risk-free rate is 3.8 percent. The portfolio value is $78,000 of which $18,000 is the risk-free security. How much is invested in stock X? A) $18,600 B) $19,667 C) $21,375 D) $22,204 E) $24,800 What is the net present value of a project with the following cash flows if the 14. discount rate is 15 percent? Cash Flow -$59.200 21.600 28.300 14.400 7.200 Year 3 A) -$8,406.11 B) -$5,433.67 C) -$3,089.16 D) $1,407.92 E) $5,433.67