FI 302 - Final Exam Study

Question 16 a. Based on the following information, calculate the expected return and standard deviation for each of the following stocks. What are the covariance and correlation between the returns of the two stocks? Calculate the portfolio return and portfolio standard deviation if you invest equally in each asset. Returns State of Economy Prob J K Recession 0.25 -0.02 0.034 Normal 0.6 0.138 0.062 Boom 0.15 0.218 0.092 b. A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7 percent and a standard deviation of 10 percent. The risk-free rate is 4 percent, and the Page 7 of 33 expected return on the market portfolio is 12 percent. Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a .45 correlation with the market portfolio and a standard deviation of 55 percent? c. Suppose the risk-free rate is 4.2 percent and the market portfolio has an expected return of 10.9 percent. The market…

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D Question 2 2 pts Stock A has an expected return of 14% and a standard deviation of 21%. Stock B has an expected return of 8% and a standard deviation of 13%. The correlation between A and B is -1. A portfolio formed from A and B where the portfolio weight in A is 0.3824 is the minimum variance portfolio for these two stocks. What is the risk-free rate in equilibrium? 0.0159 0.0550 0.0465 0.0378 0.1029

Question 29 Assume the following data for a stock: risk-free rate 5 percent: beta (market) = 1.4; beta (size) - 0.4; beta (book-to- market)-1.1; market risk premium - 13 percent; size risk premium 9.7 percent; and book-to-market risk premium = 11.2 percent. Calculate the expected return on the stock using the Fama-French three-factor model. O 26.5 percent 14.8 percent O 25.1 percent 12.0 percent

Part II Question 1: You invest in a portfolio of 5 stocks with an equal investment in each one. The betas of the 5 stocks are as follows: .8, -1.3, .95, 1.2 and 1.4. The risk-free return is 3% and the market return is 7%. A. Compute the beta of the portfolio. B. Compute the required return of the portfolio.   Question 2: You are given the following probability distribution for a stock: Probability Outcome               .5                   -6%              .5                     18% A) Compute the expected return . B) Compute the standard deviation. C) Compute the coefficient of variation.

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Frage 32 1 Pkte. You have the following data on three stocks: Stock Standard Deviation Beta 0.15 0.79 0.25 0.61 C. 0.20 1.29 if it is to be held in isolation and Stock if it is to be held as As a risk minimizer, you would choose Stock part of a well-diversified portfolio. O A; B. O B; C. O C, A. O C, B.

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Question 4 The risk-free rate of return is 2.7 percent, the inflation rate is 3.1 percent, and the market risk premium is 6.9 percent.What is the expected rate of return on a stock with a beta of 1.08?Select one:A. 12.22 percentB. 11.47 percentC. 10.15 percentD. 10.92 percent

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Need help on parts 2-7 please.

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QUESTION 1 Exhibit 5.5 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)   Stock Rit Rmt ai Beta A 10.6 15 0 0.8 Z 9.8 8.0 0 1.1   Rit = return for stock i during period t Rmt = return for the aggregate market during period t   Refer to Exhibit 5.5. What is the abnormal rate of return for Stock A during period t using only the aggregate market return (ignore differential systematic risk)?   a. 4.40   b. −1.70   c. 3.40   d. −4.40   e. −1.86

Question 4 A stock has an expected return of 13.6 percent, the risk - free rate is 3.7 percent, and the market risk premium is 7.1 percent. What must the beta of this stock be?

Stock A B C D Expected Return 10% 4% 8% 7% Standard Deviation 4% 2% 6% 8% For a rational risk-averse investor, which of the following can we definitle say is NOT CORRECT? O A. A is a better investment than D B. C is a better investment than B C. B is a better investment than C D. B is a better investment than D

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16 [Question text] What is the beta of the following portfolio?   Stock Amount invested (RM) Security beta A 14,200 1.39 B 23,900 0.98 C 8,400 1.52   Select one: A. 1.01 B. 1.05 C. 1.20 D. 1.12

which one is correct? QUESTION 8 Exhibit 7.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)   You expect the risk-free rate (RFR) to be 3 percent and the market return to be 8 percent. You also have the following information about three stocks.   ​ ​ Current Expected Expected Stock Beta Price Price Dividend X 1.25 $20 $23 $1.25 Y 1.50 $27 $29 $0.25 Z 0.90 $35 $38 $1.00     Refer to Exhibit 7.2. What are the expected (required) rates of return for the three stocks (in the order X, Y, Z)?   a. 21.25 percent, 8.33 percent, 11.43 percent   b. 16.50 percent, 5.50 percent, 22.00 percent   c. 15.00 percent, 3.50 percent, 7.30 percent   d. 6.20 percent, 2.20 percent, 8.20 percent   e. 9.25 percent, 10.5 percent, 7.5 percent

For DePaul Inc. what is the return for year 2. Round to no decimal points and use the % symbol (27%...not 27.12%)

Question 19 1 points S C You want to construct a portfolio containing equal amounts of U.S. Treasury bills, stock A, and stock B. If the beta of the stock A is 1.42 and the beta of the portfolio is 1.0 what does the beta of stock B have to be? O 1.79 O 1.89 O 2.01 2.89