Finance:The stock of Billingsley United has a beta of 0.92

Finance:The stock of Billingsley United has a beta of 0.92

Subject: Business    / Finance
Question
Question 1
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
Expected return on stock = risk-free rate + beta(market risk premium)
= 3.2 + 0.92(8.4)
= 10.928 = 10.93
Question 2
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 Return on stock A: 6,540 x 0.112 = $732.48
Return on stock B: 2,960 x 0.081 = $239.76

Total return on $9,500 portfolio: $972.24.
Rate of return on $9,500 portfolio: 972.24 ÷ 9,500 = 0.1023 = 10.23%.
Question 3
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 4
1.    What is the beta of the following portfolio?

0.98

1.02

1.11

1.14

1.20
1 points
Question 5
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 E(r) = [1,900/($1,900 + $2,700)][0.09] + [$2,700/($1,900 + $2,700)][0.15] = 12.52 percent

Question 6
1.    Standard deviation measures _____ risk while beta measures _____ risk.

systematic; unsystematic

unsystematic; systematic

total; unsystematic

total; systematic

asset-specific; market
1 points
Question 7
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 8
1.    What is the beta of the following portfolio?

1.08

1.14

1.17

1.21

1.23
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 $69.81 per share, paid a dividend of $5.4 per share during the year, and had an ending share price of $98.14. 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 11
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 12
1.    Suppose a stock had an initial price of $60.3 per share, paid a dividend of $9 per share during the year, and had an ending share price of $108.76. 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 13
1.    Calculate the expected returns of your portfolio

Stock Invest Exp Ret
A $204 8.2%
B $994 14.4%
C $1,210 27.6%

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.

Question 14
1.    Suppose a stock had an initial price of $77.74 per share, paid a dividend of $8.4 per share during the year, and had an ending share price of $90.3. 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 15
1.    Suppose a stock had an initial price of $65.43 per share, paid a dividend of $8.3 per share during the year, and had an ending share price of $108.54. If you own 45 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 16
1.    Suppose the real rate is 2.52% and the nominal rate is 11.89%. 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 17
1.    Suppose the real rate is 3.56% and the inflation rate is 6.06%. 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 18
1.    You own a portfolio invested 16.68% in Stock A, 11.93% in Stock B, 13.69% in Stock C, and the remainder in Stock D. The beta of these four stocks are 0.78, 0.38, 0.51, and 0.73. 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.    You have observed the following returns on ABC’s stocks over the last five years:
3.8%, 8.8%, -5.8%, 12.7%, -3.8%
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 20
1.    You have observed the following returns on ABC’s stocks over the last five years:
4.2%, 8%, -5.5%, 13.6%, -8.4%
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 21
1.    Suppose the nominal rate is 10.82% and the inflation rate is 5.82%. 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 22
1.    You have observed the following returns on ABC’s stocks over the last five years:
2%, 8.4%, 9%, 11.2%, 7.9%
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 23
1.    Suppose a stock had an initial price of $63.92 per share, paid a dividend of $5.6 per share during the year, and had an ending share price of $90.08. 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 24
1.    Calculate the expected returns of your portfolio

Stock Invest Exp Ret
A $203 3.5%
B $670 18.2%
C $464 23.5%

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 25
1.    You have observed the following returns on ABC’s stocks over the last five years:
4.5%, 9.7%, 7.5%, 12.9%, 4.9%
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 26
1.    Based on the following information, calculate the expected returns:

Prob Return
Recession 30% 33.1%
Boom 70% 3.1%

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 27
1.    A portfolio is invested 41.2% in Stock A, 18.8% in Stock B, and the remainder in Stock C. The expected returns are 18.6%, 33.4%, and 18.9% 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 28
1.    You own a portfolio invested 22.72% in Stock A, 16.67% in Stock B, 28.63% in Stock C, and the remainder in Stock D. The beta of these four stocks are 0.65, 0.19, 0.73, and 1.39. 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.