Corporate Finance Chapter 13

Suppose you put half of your money in Amazon and half in Alphabet. What would the beta of this combination be if Amazon has a beta of 1.52 and Alphabet has a beta of .55?

1.04

You decide to invest $20,500 in Titleist and $14,500 in Meta. What is the portfolio's beta? Titleist beta: 1.27 Meta beta: 1.96

1.553 https://www.chegg.com/homework-help/questions-and-answers/decide-invest-20-500-bank-america-14-500-twitter-portfolio-s-beta-bank-america-beta-127-tw-q28915069

Your portfolio is comprised of Stocks A, B, and C. 20 percent of your portfolio is invested in Stock A, 40 percent in Stock B, and 50 percent in Stock C. The expected returns on these three stocks are 9 percent, 12 percent, and 8 percent, respectively. What is the expected return on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12.34. Do not input a percent sign with your answer. )

10.60%

You own a portfolio that has $2,500 invested in Stock A and $3,500 invested in Stock B. If the expected returns on these stocks are 10 percent and 13 percent, respectively, what is the expected return on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

11.75%

Consider the following information: State of EconomyProbability of State of EconomyPortfolio Return if State OccursRecession.20−.16Normal.45.17Boom.35.25

13.20% https://www.chegg.com/homework-help/questions-and-answers/consider-following-information-state-economy-probability-state-economy-portfolio-return-st-q10595077

The economy has been very volatile lately. There is a 40% chance of recession and a 60% chance of a boom. Stock A would have a return of −15% if there was a recession but, a 40% return in a boom economy. What is the expected return for Stock A? 15% 40% −18% −15% 18%

18%

If risk-free investments are currently 6% and our expected return from Stock V was 14%. What is the risk premium on this investment? 4% 8% 2% 6% 10%

8%

A portfolio is invested 15 percent in Stock A, 35 percent in Stock B, and 50 percent in Stock C. The expected returns on these stocks are 6 percent, 8 percent, and 11 percent, respectively. What is the portfolio's expected return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) 8.33% 10.75% 9.85% 9.20% 10.10%

9.20%

________ measures the amount of systematic risk present in a particular risky asset relative to the systematic risk present in an average risky asset. Risk ratio Price-earnings ratio Standard deviation Beta Reward-to-risk ratio

Beta

Consider the following information: State of EconomyProbability of State of EconomyRate of Return if State OccursStock AStock BRecession.15.04−.15Normal.61.07.14Boom.24.12.31 a. Calculate the expected return for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b.Calculate the standard deviation for Stocks A and B. (

Expected Return For Stock A = 7.75% For Stock B = 13.73% Standard Deviation For Stock A = 2.61% For Stock B = 13.98% https://www.chegg.com/homework-help/questions-and-answers/consider-following-information-rate-return-state-occurs-state-probability-economy-state-ec-q14141369

Consider the following information: State of EconomyProbability of State of EconomyRate of Return if State OccursStock AStock BStock CBoom.15.38.48.28Good.45.22.19.15Poor.30−.04−.09−.06Bust.10−.16−.34−.11 Your portfolio is invested 24 percent each in A and C, and 52 percent in B. What is the expected return of the portfolio?

Expected return: 10.02% Standard Deviation: 19.52% Variance: 0.0381

Consider the following information: State of EconomyProbability of State of EconomyRate of Return if State OccursStock AStock BStock CBoom.20.38.48.28Good.50.14.19.12Poor.20−.05−.08−.06Bust.10−.19−.23−.09 a. Your portfolio is invested 22 percent each in A and C, and 56 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-1.What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.)b-2.What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Expected return: 13.18% Variance: 0.03488 Standard Deviation: 18.68%

Choose the best answer: Which of the following is the best example of systematic risk? A city imposes an additional one percent sales tax on all products. Corn prices increase due to increased demand for alternative fuels. Investors panic causing security prices around the globe to fall precipitously. A toymaker has to recall its top-selling toy. A flood washes away a firm's warehouse.

Investors panic causing security prices around the globe to fall precipitously.

Buffett owns several financial instruments: stocks issued by seven different companies, plus bonds issued by four different companies. His investments are best described as a(n): collection. portfolio. risk-free position. grouping. index.

Portfolio

Which of the following statements best describes the principle of diversification? Concentrating an investment in two or three stocks will eliminate all of the unsystematic risk. Concentrating an investment in three companies all within the same industry will greatly reduce the systematic risk. Spreading an investment across many diverse assets will eliminate some of the total risk. Spreading an investment across many diverse assets will eliminate all of the systematic risk. Spreading an investment across multiple diverse companies will not lower the total risk.

Spreading an investment across many diverse assets will eliminate some of the total risk.

What are the portfolio weights for a portfolio that has 138 shares of Stock A that sell for $48 per share and 118 shares of Stock B that sell for $38 per share? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.)

Stock A: 0.5963 Stock B: 0.4037

Portfolio Beta is the ______________ average of the Betas of the investments included in the portfolio. Expected Geometric Weighted Riskless Arithmetic

Weighted

The most important reason to diversify a portfolio is to: lower both returns and risks. eliminate all risks. increase both returns and risks. eliminate systematic risk. eliminate asset-specific risk.

eliminate asset-specific risk.

While evaluating a stock, you estimate that it will earn a return of 11 percent if economic conditions are favorable, and 3 percent if economic conditions are unfavorable. Given the probabilities of favorable versus unfavorable economic conditions, you conclude that the stock will earn 7.2 percent next year. The 7.2 percent figure is called the: geometric return. required return. historical return. arithmetic return. expected return.

expected return

To calculate the expected risk premium on a stock, one must subtract the ________ from the stock's expected return. standard deviation inflation rate risk-free rate variance expected market rate of return

risk-free rate

According to the ________, the expected return on a risky asset depends only on that asset's nondiversifiable risk. law of one price systematic risk principle open markets theorem principle of diversification efficient markets hypothesis

systematic risk principle

An unexpected post on social media caused the prices of 22 different companies' stocks to immediately increase by 10 to 15 percent. This occurrence is best described as an example of ________ risk. expected portfolio unsystematic Correct nondiversifiable market

unsystematic