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Determine the rest in the risk free asset
Course:- Finance Basics
Reference No.:- EM1355309

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1.Nico bought 100 shares of Cisco Systems stock for \$24.00 per share on January 1, 2002. He received a dividend of \$2.00 per share at the end of 2002 and \$3.00 per share at the end of 2003. At the end of 2004, Nico collected a dividend of \$4.00 per share and sold his stock for \$18.00 per share. What was Nico's realized return during the three year holding period?

1. -16.7%
2. +16.7%
3. -12.5%
4. +12.5%

2.Nico wants to invest all of his money in just two assets: the risk free asset and the market portfolio. What is Nico's portfolio beta if he invests a quarter of his money in the market portfolio and the rest in the risk free asset?

1. 0.25
2. 0.75
3. 0.00
4. 1.00

3.An investment advisor has recommended a \$50,000 portfolio containing assets R, J, and K; \$25,000 will be invested in asset R, with an expected annual return of 12 percent; \$10,000 will be invested in asset J, with an expected annual return of 18 percent; and \$15,000 will be invested in asset K, with an expected annual return of 8 percent. The expected annual return of this portfolio is

1. 10.00%.
2. 12.67%.
3. unable to be determined from the information provided.
4. 12.00%.

4.An investment banker has recommended a \$100,000 portfolio containing assets B, D, and F. \$20,000 will be invested in asset B, with a beta of 1.5; \$50,000 will be invested in asset D, with a beta of 2.0; and \$30,000 will be invested in asset F, with a beta of 0.5. The beta of the portfolio is

1. 1.45
2. 1.25
3. 1.33
4. unable to be determined from the information provided.

5.What is the expected risk-free rate of return if asset X, with a beta of 1.5, has an expected return of 20 percent, and the expected market return is 15 percent?

1. 5.0%
2. 7.5%
3. 22.5%
4. 15.0%

6.Nicole holds three stocks in her portfolio: A, B, and C. The portfolio beta is 1.40. Stock A comprises 15 percent of the dollar value of her holdings and has a beta of 1.0. If Nicole sells all of her investment in A and invests the proceeds in the risk-free asset, her new portfolio beta will be:

1. 0.60.
2. 0.88.
3. 1.00.
4. 1.25.

7.Last year Mike bought 100 shares of Dallas Corporation common stock for \$53 per share. During the year he received dividends of \$1.45 per share. The stock is currently selling for \$60 per share. What rate of return did Mike earn over the year?

1. 11.7 percent.
2. 14.1 percent.
3. 15.9 percent.
4. 13.2 percent.

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