finance homework mcq -Corporate Finance

Use the table for the question(s) below.

Consider the following stock price and shares outstanding data:

Stock Name	Price per Share	Shares Outstanding (Billions)
Lowes	$28.80	1.53
Wal-Mart	$47.90	4.17
Intel	$19.60	5.77
Boeing	$75.00	0.79

25) The market capitalization for Wal-Mart is closest to:

A) $415 Billion

B) $276 Billion

C) $479 Billion

D) $200 Billion

Stock Name	Price per Share	Shares Outstanding (Billions)	Market Capitalization (Billions)
Lowes	$28.80	1.53	$44.06
Wal-Mart	$47.90	4.17	$199.74
Intel	$19.60	5.77	$113.09
Boeing	$75.00	0.79	$59.25
		Total	$416.15

26) The total market capitalization for all four stocks is closest to:

A) $479 Billion

B) $415 Billion

C) $2,100 Billion

D) $200 Billion

27) If you are interested in creating a value-weighted portfolio of these four stocks, then the percentage amount that you would invest in Lowes is closest to:

A) 25%

B) 11%

C) 20.0%

D) 12%

28) Assume that you have $100,000 to invest and you are interested in creating a value-weighted portfolio of these four stocks. The number of shares of Wal-Mart that you would hold in your portfolio is closest to:

A) 710

B) 1390

C) 1000

D) 870

29) Assume that you have $100,000 to invest and you are interested in creating a value-weighted portfolio of these four stocks. The percentage of the shares outstanding of Boeing that you would hold in your portfolio is closest to:

A) .000018%

B) .000020%

C) .000024%

D) .000031%

30) Assume that you have $250,000 to invest and you are interested in creating a value-weighted portfolio of these four stocks. How many shares of each of the four stocks will you hold? What percentage of the shares outstanding of each stock will you hold?

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12.3 Beta Estimation

Use the following information to answer the question(s) below.

Year	Risk-free Return	Market Return	Wyatt Oil Return	Market Excess Return	Wyatt Oil Excess Return	Beta
2007	3.0%	6.0%	5.5%	3.0%	2.5%	0.833
2008	1.5%	-38.5%	-32.6%	.40%	-34.1%	0.853
2009	1.0%	22.5%	19.6%	21.5%	18.6%	0.865

1) Wyatt Oil's average historical return is closest to:

A) -2.50%

B) -3.33%

C) -4.33%

D) -5.17%

2) The Market's average historical return is closest to:

A) -2.50%

B) -3.33%

C) -4.33%

D) -5.17%

3) Wyatt Oil's average historical excess return is closest to:

A) -2.50%

B) -3.33%

C) -4.33%

D) -5.17%

4) The Market's average historical excess return is closest to:

A) -2.50%

B) -3.33%

C) -4.33%

D) -5.17%

5) Wyatt Oil's excess return for 2009 is closest to:

A) 18.6%

B) 19.6%

C) 20.0%

D) 21.5%

6) The Market's excess return for 2008 is closest to:

A) -40.0%

B) -38.5%

C) -37.0%

D) -34.1%

7) Using the average historical excess returns for both Wyatt Oil and the Market portfolio, your estimate of Wyatt Oil's Beta is closest to:

A) 0.75

B) 0.84

C) 1.00

D) 1.19

Diff: 3

Section: 12.3 Beta Estimation

Skill: Analytical

8) Using the average historical excess returns for both Wyatt Oil and the Market portfolio estimate of Wyatt Oil's Beta. When using this beta, the alpha for Wyatt oil in 2007 is closest to:

A) -0.5000%

B) -0.0250%

C) -0.0125%

D) +0.0250%

9) Using just the return data for 2009, your estimate of Wyatt Oil's Beta is closest to:

A) 0.84

B) 0.87

C) 1.00

D) 1.16

10) Using just the return data for 2008, your estimate of Wyatt Oil's Beta is closest to:

A) 0.85

B) 0.87

C) 1.00

D) 1.17

11) Which of the following statements is false?

A) Beta is the expected percent change in the excess return of the security for a 1% change in the excess return of the market portfolio.

B) Beta represents the amount by which risks that affect the overall market are amplified for a given stock or investment.

C) It is common practice to estimate beta based on the historical correlation and volatilities.

D) Beta measures the diversifiable risk of a security, as opposed to its market risk, and is the appropriate measure of the risk of a security for an investor holding the market portfolio.

12) Which of the following statements is false?

A) One difficulty when trying to estimate beta for a security is that beta depends on the correlation and volatilities of the security's and market's returns in the future.

B) It is common practice to estimate beta based on the expectations of future correlations and volatilities.

C) One difficulty when trying to estimate beta for a security is that beta depends on investors expectations of the correlation and volatilities of the security's and market's returns.

D) Securities that tend to move less than the market have betas below 1.

13) Which of the following statements is false?

A) Securities that tend to move more than the market have betas higher than 0.

B) Securities whose returns tend to move in tandem with the market on average have a beta of 1.

C) Beta corresponds to the slope of the best fitting line in the plot of the securities excess returns versus the market excess return.

D) The statistical technique that identifies the bets-fitting line through a set of points is called linear regression.

Use the equation for the question(s) below.

Consider the following linear regression model:

(Ri - rf) = ai + bi(RMkt - rf) + ei

14) The bi in the regression

A) measures the sensitivity of the security to market risk.

B) measures the historical performance of the security relative to the expected return predicted by the SML.

C) measures the deviation from the best fitting line and is zero on average.

D) measures the diversifiable risk in returns.

15) The ai in the regression

A) measures the sensitivity of the security to market risk.

B) measures the deviation from the best fitting line and is zero on average.

C) measures the diversifiable risk in returns.

D) measures the historical performance of the security relative to the expected return predicted by the SML.

16) The ei in the regression

A) measures the market risk in returns.

B) measures the deviation from the best fitting line and is zero on average.

C) measures the sensitivity of the security to market risk.

D) measures the historical performance of the security relative to the expected return predicted by the SML.