ch8 Question and answer already passed ch. 10 and 11
The common stock of Flavorful Teas has an expected return of 18.56 percent. The return on the market is 14 percent and the risk-free rate of return is 2.6 percent. What is the beta of this stock? - correct answer 18.56% = 2.6% + Beta × (14%...
ch. 10 and 11
The common stock of Flavorful Teas has an expected return of 18.56 percent.
The return on the market is 14 percent and the risk-free rate of return is 2.6
percent. What is the beta of this stock? - correct answer ✔18.56% = 2.6% +
Beta × (14% - 2.6%)
18.56% - 2.6% = Beta × (14% - 2.6%)
15.96% = Beta × 11.4%
Divide both sides by 11.4%:
(15.96% / 11.4%) = Beta
Beta ≈ 1.40
There is 14 percent probability of recession, 11 percent probability of a poor
economy, 47 percent probability of a normal economy, and 28 percent
probability of a boom. A stock has returns of −19.6 percent, 3.2 percent, 11
percent, and 26.7 percent in these states of the economy, respectively. What
is the stock's expected return? - correct answer ✔Probability times returns.
Then add them all up.
You own a portfolio that has a total value of $270,000 and it is invested in
Stock D with a beta of .73 and Stock E with a beta of 1.50. The beta of your
portfolio is equal to the market beta. What is the dollar amount of your
investment in Stock D? - correct answer ✔BP= (WD x BD) + (WE x BE)
Then 1= (1-WE) BD + (WE x BE)
Final answer subtract by one to get Weight D. Multiply by total value.
Beta - correct answer ✔a measure of the volatility—or systematic risk—of a
security or portfolio compared to the market as a whole
, The expected return on HiLo stock is 14.75 percent while the expected return
on the market is 13.7 percent. The beta of HiLo is 1.25. What is the risk-free
rate of return? - correct answer ✔9.5%
A bond had a price of $945.32 at the beginning of the year and a price of
$975.43 at the end of the year. The bond's par value is $1,000 and its coupon
rate is 4.1 percent. What was the percentage return on the bond for the year?
- correct answer ✔7.52%
You have a portfolio worth $83,500 that has an expected return of 11.1
percent. The portfolio has $17,700 invested in Stock O, $25,500 invested in
Stock P, with the remainder in Stock Q. The expected return on Stock O is
15.4 percent and the expected return on Stock P is 12.1 percent. What is the
expected return on Stock Q? - correct answer ✔8.58%
Your portfolio has a beta of 1.54. The portfolio consists of 16 percent U.S.
Treasury bills, 34 percent Stock A, and 50 percent Stock B. Stock A has a risk
level equivalent to that of the overall market. What is the beta of Stock B? -
correct answer ✔2.40%
You decide to invest in a portfolio consisting of 30 percent Stock A, 30 percent
Stock B, and the remainder in Stock C. Based on the following information,
what is the expected return of your portfolio?
State of EconomyProbability of State EconomyReturn if State OccursStock
AStock BStock CBoom.21-15.0%-2.0%-
20.9%Normal.4811.2%6.6%15.2%Recession.3124.8%13.9%29.8% - correct
answer ✔9.95%
Which one of the following stocks is correctly priced if the risk-free rate of
return is 3.2 percent and the market risk premium is 7.7 percent?
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