Reference no: EM132497809
Question 1: The risk-free rate of return is 4 percent and the expected return on the market is 12 percent. What is the expected return for a stock with a beta of 1.2?
A. 12.4% B. 12.8% C. 13.6% D.15.2% E.18.4%
Question 2: Alex is the portfolio manager of the Valpo Fund, a $5 million hedge fund that contains the following four stocks. The market risk-premium is 10% and the free rate is 4%. What rate of return should investors expect (and require) on this fund according to CAPM?
Stock Amount Beta
A $2,500,000 1.40
B 600,000 0.60
C 400,000 1.20
D 1,500,000 0.50
A.10.11% B. 12.85% C. 13.48% D. 13.84% E. 14.18%
Question 3: Given the following information, what is the expected return on a portfolio which is invested 50 percent in stock A and 50 percent in stock B?
State of Probability of Return if State Occurs
Economy State of Economy Stock A Stock B
Boom 10% 15% 17%
Normal 75% 10% 9%
Recession 15% 4% 5%
A. 9.14% B. 9.40% C. 9.60% D. 9.77% E.9.89%
Question 4: One year ago, you purchased a stock at a price of $36 a share. You received an annual dividend of $2 a share and sold the stock today for $32 a share. What was your TOTAL rate of return?
A. -4.8% B. -5.6% C. -6.3% D. -8.1% E.-11.1%
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