Managerial Finance Quiz 3

Question 1

1. A $36,000 portfolio is invested in a risk-free security and two stocks. The beta of stock A is 1.29 while the beta of stock B is 0.90. One-half of the portfolio is invested in the risk-free security. How much is invested in stock A if the beta of the portfolio is 0.58?

		$6,000
		$9,000
		$12,000
		$15,000
		$18,000

1 points

Question 2

1. You own a portfolio that has $1,900 invested in Stock A and $2,700 invested in Stock B. If the expected returns on these stocks are 9 percent and 15 percent, respectively, what is the expected return on the portfolio?

		10.57 percent
		11.14 percent
		11.96 percent
		12.52 percent
		13.07 percent

1 points

Question 3

1. Standard deviation measures _____ risk while beta measures _____ risk.

		systematic; unsystematic
		unsystematic; systematic
		total; unsystematic
		total; systematic
		asset-specific; market

1 points

Question 4

1. You own a portfolio of two stocks, A and B. Stock A is valued at $6,540 and has an expected return of 11.2 percent. Stock B has an expected return of 8.1 percent. What is the expected return on the portfolio if the portfolio value is $9,500?

		9.58 percent
		9.62 percent
		9.74 percent
		9.97 percent
		10.23 percent

1 points

Question 5

1. Portfolio diversification eliminates which one of the following?

		Total investment risk
		Portfolio risk premium
		Market risk
		Unsystematic risk
		Reward for bearing risk

1 points

Question 6

1. What is the beta of the following portfolio?

		1.08
		1.14
		1.17
		1.21
		1.23

1 points

Question 7

1. What is the beta of the following portfolio?

		0.98
		1.02
		1.11
		1.14
		1.20

1 points

Question 8

1. The stock of Billingsley United has a beta of 0.92. The market risk premium is 8.4 percent and the risk-free rate is 3.2 percent. What is the expected return on this stock?

		8.87 percent
		9.69 percent
		10.93 percent
		11.52 percent
		12.01 percent

1 points

Question 9

1. The systematic risk is same as:

		Unique risk
		Diversifiable risk
		Asset-specific risk
		Market risk
		Unsystematic risk

1 points

Question 10

1. Suppose a stock had an initial price of $99.26 per share, paid a dividend of $5.8 per share during the year, and had an ending share price of $98.58. If you own 337 shares, what are the dollar returns?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

Question 11

1. You have observed the following returns on ABC's stocks over the last five years:

3.6%, 9.1%, -10.1%, 13%, -7.6%

What is the arithmetic average returns on the stock over this five-year period.

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points

Question 12

1. A portfolio is invested 33.6% in Stock A, 23.5% in Stock B, and the remainder in Stock C. The expected returns are 14.3%, 35.2%, and 13% respectively. What is the portfolio's expected returns?

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 12.345% then enter as 12.35 in the answer box.

1 points

Question 13

1. Suppose a stock had an initial price of $76.24 per share, paid a dividend of $9.8 per share during the year, and had an ending share price of $107.22. What are the percentage returns?

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points

Question 14

1. You have observed the following returns on ABC's stocks over the last five years:

3.8%, 9.9%, 10.1%, 11.9%, 3.2%

What is the geometric average returns on the stock over this five-year period.

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points

Question 15

1. You own a portfolio invested 17.94% in Stock A, 10.6% in Stock B, 13.95% in Stock C, and the remainder in Stock D. The beta of these four stocks are 1.07, 0.93, 0.21, and 1.45. What is the portfolio beta?

Note: Enter your answer rounded off to two decimal points. For example, if your answer is 12.345 then enter as 12.35 in the answer box.

1 points

Question 16

1. Suppose the nominal rate is 10.78% and the inflation rate is 4.66%. Solve for the real rate.

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points

Question 17

1. Suppose the returns for Stock A for last six years was 4%, 7%, 8%, -2%, 9%, and 7%.
Compute the standard deviation of the returns.

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points

Question 18

1. You own a portfolio invested 21.05% in Stock A, 17.02% in Stock B, 23.1% in Stock C, and the remainder in Stock D. The beta of these four stocks are 0.97, 0.25, 0.61, and 0.78. What is the portfolio beta?

Note: Enter your answer rounded off to two decimal points. For example, if your answer is 12.345 then enter as 12.35 in the answer box.

1 points

Question 19

1. Suppose the real rate is 5.5% and the nominal rate is 12.62%. Solve for the inflation rate.

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points

Question 20

1. Suppose a stock had an initial price of $51.82 per share, paid a dividend of $5 per share during the year, and had an ending share price of $87.91. What are the percentage returns?

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points

Question 21

1. Calculate the expected returns of your portfolio

Stock	Invest	Exp Ret
A	$258	4%
B	$963	13.4%
C	$380	25.2%

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 12.345% then enter as 12.35 in the answer box.

1 points

Question 22

1. Suppose a stock had an initial price of $94.3 per share, paid a dividend of $5.9 per share during the year, and had an ending share price of $97.79. What are the percentage returns if you own 25 shares?

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points

Question 23

1. Suppose the real rate is 3.68% and the inflation rate is 6.89%. Solve for the nominal rate.

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points

Question 24

1. You have observed the following returns on ABC's stocks over the last five years:

2.7%, 8.3%, 12.7%, 11.2%, 2.1%

What is the arithmetic average returns on the stock over this five-year period.

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points

Question 25

1. Calculate the expected returns of your portfolio

Stock	Invest	Exp Ret
A	$181	9%
B	$937	13.8%
C	$1,227	21.8%

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 12.345% then enter as 12.35 in the answer box.

1 points

Question 26

1. Suppose a stock had an initial price of $89.33 per share, paid a dividend of $5.4 per share during the year, and had an ending share price of $88.95. What are the dollar returns?

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

Question 27

1. Based on the following information, calculate the expected returns:

	Prob	Return
Recession	30%	7.3%
Boom	70%	14.7%

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 12.345% then enter as 12.35 in the answer box.

1 points

Question 28

1. You have observed the following returns on ABC's stocks over the last five years:

4.3%, 9.7%, -8.3%, 10.4%, -2.5%

What is the geometric average returns on the stock over this five-year period.

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.