Finance Ch.8

The risk-free interest rate is 5.2% per year, the expected market return is 12.3% per year, and a stock's expected return is 9.4% per year. What is the stock's beta?

0.59

The expected market return is 13.8% per year, the market risk premium is 7.3% per year, and a stock's expected return is 12.1% per year. What is the stock's beta?

0.77

You manage a $10 million portfolio has a beta of 1.1 and an expected return of 12.7% per year. You intend to invest an additional $4 million in the portfolio so that the expected return decreases to 12.0% per year. If the risk-free interest rate is 4.6% per year, what does the beta of the new investment need to be?

0.77

Based on the investment portfolio information shown below, what is the portfolio's beta? Stock Investment Beta A $25,000 1.5 B $55,000 0.7 C $30,000 0.6 D $65,000 1.2

0.98

Based on the economic scenarios shown below, what is the standard deviation of the stock's expected return? Scenario Probability Return Boom 20% 23% Normal 40% 12% Recession 40%-15%

15.6%

Based on the historical returns shown below, what is the standard deviation of the stock's expected return for 2015? Year Return 2011 -13% 2012 24% 2013 10% 2014 17%

16.1%

Which of the following stocks has the lowest market risk?

A stock with a beta of 0.8 and a standard deviation of expected return of 15% per year

A well-diversified investor is not subject to which type of risk?

Company risk

What does beta not measure?

Company risk

Which of the following equations represents the Security Market Line?

Expected return = Risk-free interest rate + Beta(Market risk premium)

What does beta measure?

Market risk

An undiversified investor is not subject to which type of risk?

None of these answers

A well-diversified investor is subject to which type of risk?

Systemic risk

What does a stock's standard deviation of expected return measure?

Total risk

The beta of the stock market is ____ and the beta of the risk-free asset is ____?

1, 0

Based on the investment portfolio information shown below, what is the portfolio's beta? Stock Investment Beta X $149,000 1.6 Y $271,000 0.7

1.02

Based on the investment portfolio information shown below, what is the portfolio's beta? Stock Investment Beta R $4,000 1.1 T $9,000 0.5 P $6,000 1.8

1.04

Based on the investment portfolio information shown below, what is the portfolio's beta? Stock Investment Beta U $200,000 1.2 S $500,000 0.7 V $300,000 1.1 H $600,000 1.3

1.06

Based on the investment portfolio information shown below, what is the portfolio's beta? Stock Investment Beta A $5,000 1.6 B $7,000 0.9 C $3,000 1.2 D $4,000 0.6

1.07

Based on the investment portfolio information shown below, what is the portfolio's beta? Stock Investment Beta M $250,000 1.2 N $400,000 0.9 Q $350,000 1.7

1.26

The risk-free interest rate is 3.7% per year, the market risk premium is 5.7% per year, and a stock's expected return is 10.9% per year. What is the stock's beta?

1.26

Given that you are risk averse, you would prefer the stock with which coefficient of variation?

1.3

You manage a $7 million portfolio has a beta of 0.85 and an expected return of 10.1% per year. You intend to invest an additional $3 million in the portfolio so that the expected return increases to 11.0% per year. If the risk-free interest rate is 5.1% per year, what does the beta of the new investment need to be?

1.36

The risk-free interest rate is 3.9% per year, the market risk premium is 6.2% per year, and a stock's expected return is 12.6% per year. What is the stock's beta?

1.40

The expected market return is 11.2% per year, the market risk premium is 5.7% per year, and a stock's expected return is 13.6% per year. What is the stock's beta?

1.42

You manage a $20 million portfolio has a beta of 0.88 and an expected return of 9.4% per year. You intend to invest an additional $10 million in the portfolio so that the expected return increases to 10.5% per year. If the market risk premium is 5.1% per year, what does the beta of the new investment need to be?

1.53

You manage a $6 million portfolio has a beta of 1.2 and an expected return of 14.3% per year. You intend to invest an additional $1 million in the portfolio so that the expected return increases to 14.7% per year. If the risk-free interest rate is 4.3% per year, what does the beta of the new investment need to be?

1.54

You manage a $100 million portfolio has a beta of 0.92 and an expected return of 9.8% per year. You intend to invest an additional $40 million in the portfolio so that the expected return increases to 10.8% per year. If the market risk premium is 5.0% per year, what does the beta of the new investment need to be?

1.62

A stock has a beta of 1.7, an expected return of 12.3% per year and a standard deviation of expected return of 21.6% per year. What is the stock's coefficient of variation?

1.76

You manage a $50 million portfolio has a beta of 1.32 and an expected return of 15.6% per year. You intend to invest an additional $5 million in the portfolio so that the expected return increases to 16.0% per year. If the risk-free interest rate is 4.8% per year, what does the beta of the new investment need to be?

1.86

You manage a $15 million portfolio has a beta of 1.23 and an expected return of 11.6% per year. You intend to invest an additional $5 million in the portfolio so that the expected return increases to 12.5% per year. If the market risk premium is 5.3% per year, what does the beta of the new investment need to be?

1.91

Based on the historical returns shown below, what is the stock's expected return for 2015? Year Return 2012 17% 2013 -12% 2014 25%

10.0%

Based on the product demand scenarios shown below, what is the stock's annual expected return? Scenario Probability Return High 25% 30% Normal 50% 15% Low 25% -20%

10.0%

The expected market return is 10.3% per year, the market risk premium is 4.8% per year, and a stock's beta is 0.93. What is the stock's annual expected return?

10.0%

The risk-free interest rate is 1.9% per year, the expected market return is 7.7% per year, and a stock's beta is 1.45. What is the stock's annual expected return?

10.3%

The risk-free interest rate is 4.1% per year, a stock's expected return is 8.9% per year, and the stock's beta is 0.75. What is the annual expected market return?

10.50%

The risk-free interest rate is 4.8% per year, a stock's expected return is 12.4% per year, and the stock's beta is 1.25. What is the annual expected market return?

10.88%

The risk-free interest rate is 5.1% per year, the expected market return is 12.8% per year, and a stock's beta is 0.75. What is the stock's annual expected return?

10.9%

Based on the weather scenarios shown below, what is the stock's annual expected return? Scenario Probability Return Hot 30% 30% Normal 40% 15% Cool 20% -10% Cold 10% -20%

11.0%

Based on the weather scenarios shown below, what is the standard deviation of the stock's expected return? Scenario Probability Return Hot 20% 19% Normal 50% 11% Cold 30% -10%

11.1%

Based on the investment portfolio information shown below, what is the portfolio's expected return? Stock Investment Return X $4,000 13.1% Y $9,000 10.2% Z $6,000 11.8%

11.3%

Based on the weather scenarios shown below, what is the standard deviation of the stock's expected return? Scenario Probability Return Dry 25% 18% Normal 45% 12% Wet 30%-10%

11.3%

Based on the investment portfolio information shown below, what is the portfolio's expected return? Stock Investment Return W $15,000 12.7% X $35,000 10.1% Y $10,000 14.7% Z $20,000 11.9%

11.6%

Based on the weather scenarios shown below, what is the stock's annual expected return? Scenario Probability Return Wet 35% 22% Normal 45% 14% Dry 20% -12%

11.6%

Based on the weather scenarios shown below, what is the standard deviation of the stock's expected return? Scenario Probability Return Wet 35% 17% Normal 30% 10% Dry 35% -10%

11.7%

Based on the investment portfolio information shown below, what is the portfolio's expected return? Stock Investment Return X $250,000 13.4% Y $400,000 10.9% Z $350,000 11.7%

11.8%

The risk-free interest rate is 4.4% per year, the expected market return is 11.2% per year, and a stock's beta is 1.1. What is the stock's annual expected return?

11.9%

The risk-free interest rate is 4.3% per year, the market risk premium is 6.4% per year, and a stock's beta is 1.2. What is the stock's annual expected return?

12.0%

Based on the economic scenarios shown below, what is the standard deviation of the stock's expected return? Scenario Probability Return Boom 30% 20% Normal 40% 12% Recession30%-10%

12.1%

Based on the investment portfolio information shown below, what is the portfolio's expected return? Stock Investment Return H $47,000 10.1% J $82,000 11.7% K $78,000 13.9%

12.2%

Based on the investment portfolio information shown below, what is the portfolio's expected return? Stock Investment Return E $415,000 11.7% A $335,000 15.1% I $550,000 12.7% O $620,000 10.9%

12.3%

Based on the historical returns shown below, what is the standard deviation of the stock's expected return for 2015? Year Return 2012 16% 2013 13% 2014 -7%

12.5%

Based on the product demand scenarios shown below, what is the standard deviation of the stock's expected return? Scenario Probability Return High 20% 30% Normal 60% 10% Low 20% -10%

12.6%

The expected market return is 11.2% per year, the market risk premium is 5.7% per year, and a stock's beta is 1.3. What is the stock's annual expected return?

12.9%

Based on the investment portfolio information shown below, what is the portfolio's expected return? Stock Investment Return A $200,000 14.4% B $300,000 12.9%

13.5%

Based on the historical returns shown below, what is the standard deviation of the stock's expected return for 2015? Year Return 2011 11% 2012 14% 2013 10% 2014 -16%

13.9%

Based on the weather scenarios shown below, what is the standard deviation of the stock's expected return? Scenario Probability Return Cold 30% -12% Normal 40% 14% Hot 30% 22%

13.9%

You manage a $4 million portfolio has a beta of 1.25 and an expected return of 11.7% per year. You intend to invest an additional $2 million in the portfolio so that the expected return increases to 12.5% per year. If the risk-free interest rate is 4.2% per year, what does the expected return of the new investment need to be?

14.1%

You manage a $20 million portfolio has a beta of 1.14 and an expected return of 12.2% per year. You intend to invest an additional $5 million in the portfolio so that the expected return increases to 12.7% per year. If the risk-free interest rate is 3.9% per year, what does the expected return of the new investment need to be?

14.7%

You manage a $76 million portfolio has a beta of 1.08 and an expected return of 9.8% per year. You intend to invest an additional $24 million in the portfolio so that the expected return increases to 11.0% per year. If the risk-free interest rate is 5.6% per year, what does the expected return of the new investment need to be?

14.8%

Based on the product demand scenarios shown below, what is the standard deviation of the stock's expected return? Scenario Probability Return High 20% 32% Normal 55% 14% Low 25% -16%

16.6%

Based on the product demand scenarios shown below, what is the stock's annual expected return? Scenario Probability Return High 35% 35% Normal 45% 15% Low 20% -10%

17.0%

Based on the historical returns shown below, what is the standard deviation of the stock's expected return for 2015? Year Return 2012 -12% 2013 17% 2014 19%

17.3%

Based on the economic scenarios shown below, what is the standard deviation of the stock's expected return? Scenario Probability Return Boom 25% 30% Normal 50% 10% Recession25% -20%

17.9%

Based on the historical returns shown below, what is the standard deviation of the stock's expected return for 2015? Year Return 2011 -12% 2012 21% 2013 -10% 2014 19%

17.9%

Based on the historical returns shown below, what is the standard deviation of the stock's expected return for 2015? Year Return 2012 14% 2013 -10% 2014 26%

18.3

Based on the historical returns shown below, what is the standard deviation of the stock's expected return for 2015? Year Return 2011 12% 2012 -24% 2013 17% 2014 4%

18.3%

Based on the historical returns shown below, what is the standard deviation of the stock's expected return for 2015? Year Return 2012 14% 2013 -10% 2014 27%

18.8%

You manage a $34 million portfolio has a beta of 0.89 and an expected return of 9.7% per year. You intend to invest an additional $10 million in the portfolio so that the expected return increases to 11.1% per year. If the risk-free interest rate is 5.2% per year, what does the beta of the new investment need to be?

2.11

Based on the product demand scenarios shown below, what is the standard deviation of the stock's expected return? Scenario Probability Return High 25% 35% Normal 40% 11% Low 35% -18%

20.5%

Based on the historical returns shown below, what is the standard deviation of the stock's expected return for 2015? Year Return 2012 17% 2013 12% 2014 -21%

20.6%

A stock's expected return is 9.9% per year, the stock's beta is 0.85, and the market risk premium is 6.3% per year. What is the annual risk-free interest rate?

4.55%

Based on the historical returns shown below, what is the stock's expected return for 2015? Year Return 2010 -8% 2011 12% 2012 18% 2013 -11% 2014 14%

5.0%

Based on the historical returns shown below, what is the stock's expected return for 2015? Year Return 2011 -12% 2012 19% 2013 -11% 2014 24%

5.0%

The risk-free interest rate is 3.7% per year, a stock's expected return is 10.9% per year, and the stock's beta is 1.4. What is the annual market risk premium?

5.14%

You manage a $36 million portfolio has a beta of 1.12 and an expected return of 10.7% per year. You intend to invest an additional $14 million in the portfolio so that the expected return increases to 12.0% per year. If the risk-free interest rate is 4.8% per year, what is the annual market risk premium?

5.27%

A stock's expected return is 15.8% per year, the stock's beta is 1.48, and the market risk premium is 7.1% per year. What is the annual risk-free interest rate?

5.29%

Based on the economic scenarios shown below, what is the stock's annual expected return? Scenario Probability Return Boom 20% 40% Normal 40% 12% Recession 30%-15% Depression 10%-30%

5.3%

A stock's expected return is 13.3% per year, the stock's beta is 1.35, and the market risk premium is 5.8% per year. What is the annual risk-free interest rate?

5.47%

Based on the historical returns shown below, what is the stock's expected return for 2015? Year Return 2010 18% 2011 12% 2012 -23% 2013 11% 2014 10%

5.6%

You manage a $16 million portfolio has a beta of 0.96 and an expected return of 8.6% per year. You intend to invest an additional $4 million in the portfolio so that the expected return decreases to 8.0% per year. If the risk-free interest rate is 3.7% per year, what does the expected return of the new investment need to be?

5.6%

Based on the economic scenarios shown below, what is the stock's annual expected return? Scenario Probability Return Boom 15% 35% Normal 35% 20% Recession35% -10% Depression15%-20%

5.8%

The risk-free interest rate is 4.7% per year, a stock's expected return is 15.3% per year, and the stock's beta is 1.7. What is the annual market risk premium?

6.24%

Based on the historical returns shown below, what is the stock's expected return for 2015? Year Return 2010 -10% 2011 19% 2012 -13% 2013 21% 2014 15%

6.4%

Based on the historical returns shown below, what is the stock's expected return for 2015? Year Return 2010 19% 2011 -29% 2012 -13% 2013 32% 2014 23%

6.4%

Based on the historical returns shown below, what is the standard deviation of the stock's expected return for 2015? Year Return 2011 13% 2012 24% 2013 10% 2014 11%

6.5%

Based on the product demand scenarios shown below, what is the stock's annual expected return? Scenario Probability Return High 35% 16% Normal 35% 11% Low 30% -10%

6.5%

The risk-free interest rate is 2.3% per year, the market risk premium is 5.1% per year, and a stock's beta is 0.85. What is the stock's annual expected return?

6.6%

You manage a $12 million portfolio has a beta of 0.92 and an expected return of 11.2% per year. You intend to invest an additional $5 million in the portfolio so that the expected return increases to 12.5% per year. If the risk-free interest rate is 5.1% per year, what is the annual market risk premium?

6.63%

You manage a $7 million portfolio has a beta of 0.96 and an expected return of 9.8% per year. You intend to invest an additional $3 million in the portfolio so that the expected return increases to 10.5% per year. If the risk-free interest rate is 3.2% per year, what is the annual market risk premium?

6.88%

Based on the historical returns shown below, what is the stock's expected return for 2015? Year Return 2010 -13% 2011 23% 2012 16% 2013 28% 2014 -17%

7.4%

The expected market return is 8.1% per year, the market risk premium is 5.2% per year, and a stock's beta is 0.9. What is the stock's annual expected return?

7.6%

You manage a $22 million portfolio has a beta of 1.23 and an expected return of 14.1% per year. You intend to invest an additional $13 million in the portfolio so that the expected return increases to 14.5% per year. If the risk-free interest rate is 4.2% per year, what is the annual market risk premium?

8.05%

Based on the historical returns shown below, what is the stock's expected return for 2015? Year Return 2012 18% 2013 21% 2014 -14%

8.3%

The risk-free interest rate is 3.7% per year, the market risk premium is 5.6% per year, and a stock's beta is 0.84. What is the stock's annual expected return?

8.4%

Based on the historical returns shown below, what is the stock's annual expected return for 2015? Year Return 2011 22% 2012 14% 2013 -12% 2014 10%

8.5%

The risk-free interest rate is 2.2% per year, the market risk premium is 5.5% per year, and a stock's beta is 1.14. What is the stock's annual expected return?

8.5%

Based on the investment portfolio information shown below, what is the portfolio's expected return? Stock Investment Return A $250,000 9.4% B $500,000 8.9% C $300,000 7.7% D $400,000 8.4%

8.6%

Based on the investment portfolio information shown below, what is the portfolio's expected return? Stock Investment Return S $200,000 9.4% D $500,000 8.9% F $300,000 7.7%

8.6%

Based on the economic scenarios shown below, what is the stock's annual expected return? Scenario Probability Return Boom 25% 18% Normal 60% 10% Recession 15% -12%

8.7%

Based on the weather scenarios shown below, what is the stock's annual expected return? Scenario Probability Return Cold 30% 14% Normal 55% 11% Hot 15% -8%

9.1%

Based on the historical returns shown below, what is the stock's annual expected return for 2015? Year Return 2011 12% 2012 -14% 2013 32% 2014 7%

9.3%

Based on the economic scenarios shown below, what is the stock's annual expected return? Scenario Probability Return Boom 30% 25% Normal 50% 10% Recession20%-15%

9.5%

Which of the following stocks has the lowest total risk?

A stock with a beta of 0.9 and a standard deviation of expected return of 13% per year

Which of the following stocks has the highest total risk?

A stock with a beta of 1.4 and a standard deviation of expected return of 26% per year

Which of the following stocks has the highest market risk?

A stock with a beta of 1.5 and a standard deviation of expected return of 12% per year