ASU FIN300 Exam 3

In a game of chance, the probability of winning a $50 is 40% and the probability of losing a $50 prize is 60%. What is the expected value of the prize in the game?

$-10

Security Analysts that have evaluated Concordia Corporation, have determined that there is a 15% chance that the firm will generate earnings per share of $2.40; a 60% probability that the firm will generate earnings per share of $3.10; and a 25% probability that the firm will generate earnings per share of $3.80. What are the expected earnings per share for Concordia Corporation? (Round off to the nearest $0.01)

$3.17

In a game of chance, the probability of winning a $50 prize is 40 percent, and the probability of winning a $100 prize is 60 percent. What is the expected value of the prize in the game?

$80

Sayers purchased a stock with a coefficient of variation equal to 0.125. The expected return on the stock is 20 percent. What is the variance of the stock? 0.625000 0.025000 0.790500 0.000625

0.000625

The expected return for an asset is 18.75 percent. If the return distribution for the asset is described as in the following table, what is the variance for the asset's returns? (Round intermediate computations and final answer to 6 decimal places.) Return Probability 0.10 0.25 0.20 0.50 0.25 0.25

0.002969

Elrond has made an investment that will generate returns that are subject to the state of the economy. Use the following information to calculate the variance of the return distribution for Elrond's investment. (Do not round intermediate computations. Round your final answer to four decimal places.) State Return Probability Weak 0.10 0.8 OK 0.17 0.1 Great 0.28 0.1

0.0031

Tommie has made an investment that will generate returns that are subject to the state of the economy during the year. Use the following information to calculate the standard deviation of the return distribution for Tommie's investment. (Do not round intermediate computations. Round your final answer to four decimal places.) State Return Probability Weak 0.13 0.30 OK 0.20 0.40 Great 0.25 0.30

0.0467

Use the following table to calculate the expected return from an asset. Return Probability 0.05 0.1 0.1 0.15 0.15 0.5 0.25 0.25

15.75%

The expected return for the asset shown in the following table is 18.75 percent. If the return distribution for the asset is described as below, what is the standard deviation for the asset's returns? (Round intermediate computations and final answer to 6 decimal places.) Return Probability 0.10 0.25 0.20 0.50 0.25 0.25

0.054486

The covariance of the returns between Stock A and Stock B is 0.0087. The standard deviation of Stock A is 0.26, and the standard deviation of Stock B is 0.37. What is the correlation coefficient between the returns of the two stocks? Entry field with correct answer 0.096200 0.90437 0.96200 0.090437

0.090437

Stock A has exhibited a standard deviation in stock returns of 0.5, whereas Stock B has exhibited a standard deviation of 0.6. The correlation coefficient between the stock returns is 0.5. What is the variance of a portfolio composed of 70 percent Stock A and 30 percent Stock B?

0.2179

Braniff Ground Services stock has an expected return of 9 percent and a variance of 0.25 percent. What is the coefficient of variation for Braniff? (Round your final answer to four decimal places.)

0.5556

Aquaman Stock has exhibited a standard deviation in stock returns of 0.7, whereas Green Lantern Stock has exhibited a standard deviation of 0.8. The correlation coefficient between the stock returns is 0.1. What is the standard deviation of a portfolio composed of 70 percent Aquaman and 30 percent Green Lantern? (Round the answer to five decimal points.)

0.56676

The covariance of the returns between Wildcat Stock and Sun Devil Stock is 0.09875. The variance of Wildcat is 0.2116, and the variance of Sun Devil is 0.1369. What is the correlation coefficient between the returns of the two stocks? Entry field with correct answer 0.580199 0.340823 0.170200 0.293347

0.580199

You invested $3,000 in a portfolio with an expected return of 10 percent and $2,000 in a portfolio with an expected return of 16 percent. What is the expected return of the combined portfolio? Entry field with correct answer 12.4% 6.2% 13.6% 13.0%

12.4%

The risk-free rate of return is currently 3 percent, whereas the market risk premium is 6 percent. If the beta of Lenz, Inc., stock is 1.8, then what is the expected return on Lenz? Entry field with correct answer 8.40% 10.80% 13.80% 19.20%

13.80%

You have invested 40 percent of your portfolio in an investment with an expected return of 12 percent and 60 percent of your portfolio in an investment with an expected return of 20 percent. What is the expected return of your portfolio? Entry field with correct answer 16.0% 16.8% 15.2% 17.6%

16.8%

Use the following table to calculate the expected return from an asset. Return Probability 0.1 0.25 0.2 0.5 0.25 0.25

18.75%

The beta of Elsenore, Inc., stock is 1.6, whereas the risk-free rate of return is 8 percent. If the expected return on the market is 15 percent, then what is the expected return on Elsenore? Entry field with correct answer 11.20% 19.20% 32.00% 24.00%

19.20%

The expected return on Kiwi Computers stock is 16.6 percent. If the risk-free rate is 4 percent and the expected return on the market is 10 percent, then what is Kiwi's beta? Entry field with correct answer 3.15 2.80 1.26 2.10

2.10

The beta of RicciCo.'s stock is 3.2, whereas the risk-free rate of return is 9 percent. If the expected return on the market is 18 percent, then what is the expected return on RicciCo.? Entry field with correct answer 48.60% 57.60% 37.80% 28.80%

37.80%

The expected return on KarolCo. stock is 16.5 percent. If the risk-free rate is 5 percent and the beta of KarolCo is 2.3, then what is the risk premium on the market? Entry field with correct answer 2.5% 5.0% 7.5% 10.0%

5.0%

The expected return on Mike's Seafood stock is 17.9 percent. If the expected return on the market is 13 percent and the beta for Kiwi is 1.7, then what is the risk-free rate? Entry field with correct answer 6.0% 4.5% 5.0% 5.5%

6.0%

Which of the following is the best measure of the systematic risk in a portfolio? Entry field with correct answer Variance Standard deviation Covariance Beta

Beta

Given the historical information in the chapter, which of the following investment classes had the greatest average return?

Small U.S. Stocks

Given the historical information in the chapter, which of the following investment classes had the greatest variability in returns?

Small U.S. Stocks

Which of the following statements is correct? When choosing between two investments that have the same level of risk, investors prefer the investment with the lower return. The greater the risk associated with an investment, the lower the return investors expect from it. If two investments have the same expected return, investors prefer the riskiest alternative. When choosing between two investments that have the same level of risk, investors prefer the investment with the higher return.

When choosing between two investments that have the same level of risk, investors prefer the investment with the higher return.

A portfolio with a level of systematic risk is the same as that of the market has a beta that is Entry field with correct answer equal to zero. less than zero. equal to one. less than the beta of the risk-free asset.

equal to one.