What is the expected return on an asset that is expected to have returns of -10%, 8%, and 20% when the economy is in boom, normal, and recession states, respectively? The probabilities of boom, normal, and recession states happening are 20%, 50%, and 30%, respectively.

• 6.00%
• 2.67%
• 8.00%
• 5.00%

What is the standard deviation of returns on an asset that gives returns of 20%, 5%, and -15% with the probabilities of 20%, 50%, and 30%, respectively, if its mean return is 2%?

• 14.40%
• 3.69%
• 12.49%
• 14.34%
• 156.00%

A rapidly growing company just paid a dividend of $1.50 a share. For the next three years, the earnings growth rate is projected to be 15% each year, and then 4% each year thereafter. If the required rate of return is 9%, what is the value of the stock?

• $35.15
• $38.63
• $41.65
• $43.88

You have a two-stock portfolio. One stock has an expected return of 12% and a standard deviation of 24%. The other has an expected return of 8% and a standard deviation of 20%. You invested in these stocks equally (50% of your investment went toward each of the two stocks). If the two stocks are negatively correlated, which one of the following is the most feasible standard deviation of the portfolio?

• 25%
• 22%
• 18%
• not enough information to determine

You have a portfolio with three stocks. The table below summarizes the weights and betas of those three stocks.

	Weight	Beta
I	50%	2.10
II	30%	1.25
III	20%	0.55

What is the beta of the portfolio?

• 1.54
• 0.43
• 0.51
• 1.30

A preferred stock pays an annual dividend of $3.50. If the return required by shareholders is 9% and the company is expecting earnings growth of 4%, then the price per share for this preferred stock is .

• $50.00
• $31.82
• $87.50
• $38.89

You are trying to decide whether to purchase stock or not. The stock is currently sold for $41.54 and is expected to be $45.33 in a year. A dividend of $2.00 per share will be distributed during the year. The stock has a beta of 1.3. The risk-free rate is 3%, and the expected return on the market is 12%. Based on the information, should you buy the stock?

• No, because the expected return of the stock is above the SML.
• Yes, because the expected return of the stock is below the SML.
• Yes, because the expected return of the stock is above the SML.
• No, because the expected return of the stock is below the SML.

KTPs most recent dividend was $1.24 per share, and the stock is selling today in the market for $67. The dividend is expected to grow at a rate of 5% per year for the foreseeable future. If the return is 7% on investments with comparable risk, should you purchase the stock?

• No, because the stock is overpriced $5.00.
• Yes, because the stock is underpriced $5.00.
• Yes, because the stock is underpriced $1.90.
• No, because the stock is overpriced $1.90.

Currently, Treasury securities trade to yield 2.5%. The market offers a premium over the risk-free rate of 6%. If the beta of a stock is 0.93, what is the required rate of return of the stock?

• 8.33%
• 5.76%
• 8.08%
• 9.26%

You are considering purchasing a stock that currently sells for $50. The expected price of the stock in a year is $45, and during the coming year a $2 dividend is expected to be paid. The risk-free rate is 5% and the market return is 10%. The stock has a beta of 0.85. What is the holding period return of the stock?

• -6.7%
• 14.0%
• -6.0%
• 9.3%
• 13.5%