FI 302 - Final Exam Study

QUESTION 37 You have developed the following data on three stocks: Stocks Std. Deviation Beta A 0.45 0.60 B 0.60 0.75 C 0.55 1.50 If you are a risk minimizer, you should choose Stock a well-diversified portfolio. if it is to be held in isolation and Stock if it is to be held as part of A; A O B; A C; A O A; C O C; B 3.75 po 13

stions Problem 8.13 (CAPM, Portfolio Risk, and Return) eBook Problem Walk-Through Question 11 of 15▸ Check My Work Consider the following information for stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Expected Return Standard Deviation Beta A 8.50% 16% 0.8 C 9.25 10.75 16 16 1.1 1.7 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 6.5%, and the market is in equilibrium. (That is, required returns equal expected returns.) a. What is the market risk premium (rM - TRF)? Round your answer to one decimal place. % b. What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. c. What is the required return of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. % d. What would you expect the standard deviation of Fund P…

QUESTION 3 – Risk and ReturnSintok Corporation has collected information on the following three investments. Which investment is the most favourable based on the information presented?Stock A Stock B Stock CProbability Return Probability Return Probability Return0.15 2% 0.25 -3% 0.1 -5%0.4 7% 0.5 20% 0.4 10%0.3 10% 0.25 25% 0.3 15%0.15 15% 0.2 30%

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.

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

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.

MINDTAP ating a Stock's Risk and Required Return Problem 8.13 (CAPM, Portfolio Risk, and Return) % eBook 8 Problem Walk-Through Consider the following information for stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) % Stock A B C Expected Return Standard Deviation Beta 15% 0.7 11.05 15 1.3 11.75 15 1.5 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 6.5%, and the market is in equilibrium. (That is, required returns equal expected returns.) a. What is the market risk premium (rM - TRF)? Round your answer to one decimal place. b. What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. -Select- + 5 8.95% d. What would you expect the standard deviation of Fund P to be? I. Less than 15% II. Greater than 15% III. Equal to 15% https://www.jpmorg... c. What is…

Question 4 Analyzing the stock market produces the following information about the returns of two stocks: Expected Return Standard Deviation Stock 1 -15% 11% Stock 2 -20% 21% Assume that the returns are positively correlated, with correlation = 0.60. (0) Find the mean and standard deviation of the return on a portfolio consisting of an equal investment in each of the two stocks. Suppose that you wish to invest $1 million. Discuss whether you should invest your money in stock 1, stock 2, or a portfolio composed of an equal amount of both stocks.

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

QUESTION 3– Risk and Return Sintok Corporation has collected information on the following three investments. Which investment is the most favourable based on the information presented? Stock A Probability 0.15 Stock B Probability 0.25 Stock C Probability 0.1 Return Return Return 2% -3% -5% 0.4 7% 0.5 20% 0.4 10% 0.3 10% 0.25 25% 0.3 15% 0.15 15% 0.2 30%

Question 25 (2.5 points) Listen The risk-free rate is 1.45% and the market risk premium is 5.21%. According to the Capital Asset Pricing Model (CAPM), a stock with a beta of 1.13 will have an %. expected return of 1) 7.34% 2) 15.66% 3) 5.56% 4) 9.12% 5) 13.25%

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

stock expected return beta a 9.01% 1.7 b 7.06% 0.0 c 5.04% 0.67 d 8.74% 0.87 e 11.5% 2.0 Assume the risk-free rate (kRF) is 7%. and the market risk premium is (kM-kRF) is 2%. Which security is best for investment? why? plss show formula and solution not in spreadsheet form

Tiempo restante U:28:23 What is the beta of a portfolio that has $18,400 in Stock M, $6,320 in Stock N, $32,900 in Stock O and $11,850 in Stock P. Their Betas are .97, 1.04, 1.23, and .88, respectivley? O a. 1.04 O b. 1.11 О с. 1.08 O d. 1.15 O e. .99

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

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

Question 11 Using the single index model, what is the alpha of a stock with beta of 1.2, a market return of 14%, risk free rate of 3% and the actual return of the stock is 1896? 1.80% O2.11% O-3.12% O 0.75% -1.37% W

Q No 3 Assume you are a portfolio manager at JS Global Capital Ltd. Recently you came across three attractive stocks and want to create a portfolio investment in these three stocks. The details of the stocks are given below: Company name Volatility (Standard deviation) Weight in Portfolio Correlation with the market portfolio Engro Ltd 25% 0.30 0.40 Lucky Cement Ltd 12% 0.30 0.60 FFC Ltd 13% 0.40 0.50   The expected return on the market portfolio is 8% and its volatility is 10%. The risk-free rate based on central bank’s discount rate is 3%.  Calculate each of the stock’s expected return and risk (beta) as compared to the market What should be the expected return of the portfolio based on values calculated in part a. Calculate the beta of the portfolio? what does it tells regarding the riskiness of the portfolio? Using the values from part c, can you calculate the expected return of the portfolio? Is it similar to your answer in part b? Why…

Q No 3 Assume you are a portfolio manager at JS Global Capital Ltd. Recently you came across three attractive stocks and want to create a portfolio investment in these three stocks. The details of the stocks are given below: Company name Volatility (Standard deviation) Weight in Portfolio Correlation with the market portfolio Engro Ltd 25% 0.30 0.40 Lucky Cement Ltd 12% 0.30 0.60 FFC Ltd 13% 0.40 0.50   The expected return on the market portfolio is 8% and its volatility is 10%. The risk-free rate based on central bank’s discount rate is 3%.  Calculate each of the stock’s expected return and risk (beta) as compared to the market What should be the expected return of the portfolio based on values calculated in part a. Calculate the beta of the portfolio? what does it tells regarding the riskiness of the portfolio?

17 [Question text] Stock W, X, Y and Z has a beta of 1.19, 0.87, 0.91 and 1.26, respectively. Based on the beta values, which stock should you choose if you are a risk averse investor? Select one: A. Z B. X C. Y D. W

Question 25 What is the correlation between Stock 1 and Stock 2's returns? Expected Return Probability Stock 1 Stock 2 Good Economy 0.25 0.81 0.02 Okay Economy 0.35 0.19 -0.06 Bad Economy 0.40 -0.50 -0.28