Question
Suppose you are the money manager of a $10 million investment fund. The fund consists of 2 stocks with the following investment and betas. Assume
-
Suppose you are the money manager of a $10 million investment fund. The fund consists of 2 stocks with the following investment and betas. Assume that the CAPM holds, and kRF=6%, kM=14%.
Stock
Investment
Beta
A
$ 4 million
1.2
B
$ 6 million
1.4
What is the expected return of the fund?
13.14%
14.42%
15.87%
16.56%
17.79%
-
The total annual returns on common stocks averaged 12.2% from 1926 to 1994, small company stocks averaged 17.4%, long-term government bonds averaged 5.2%, while Treasury Bills averaged 3.7%. What was the average risk premium earned by long-term Government Bonds, and small company stocks respectively?
8.5%; 1.5%
0; 12.2%
1.5%; 13.7%
1.5%; 7.0%
7.0%; 5.2%
Money that the firm has already spent or is committed to spend regardless of whether a project is taken is called a(n)
-
sunk cost.
opportunity cost.
erosion cost.
fixed cost.
irrational cost.
-
The prices for IMB over the last 3 years are given below. Assuming no dividends were paid, what was the 3-year holding period return?
Year Price
0 $ 70
1 64
2 68
3 80
17.65%.
5.11%.
14.29%.
-8.57%.
10.50%.
-
A stock with a beta of zero would be expected to:
have a rate of return equal to the risk-free rate.
have a rate of return equal to the market rate.
have a rate of return equal to zero.
have a rate of return equal to the one.
have a negative return when the market is up.
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