1. You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.65 and the total portfolio is as risky as the market, what must be the beta of other stock in your portfolio?
2. You have $100,000 to invest in a portfolio containing Stock X, Stock Y and a risk-free asset. You must invest all your money. Your goal is to create a portfolio that has an expected return of 11.22% and that has only 96% of the risk of overall market. If Stock X has an expected return of 15.35% and a beta of 1.55, Stock Y has an expected return of 9.4% and a beta of 0.7 and the risk-free rate is 4.5%, how much money will you invest in Stock X?
3. Antiques R Us is a mature manufacturing firm. The Company's last dividend was $9, but management expects to reduce the dividend payout by 4% per year indefinitely. The required rate of return is 11%. What will you pay for a share today?
4. Mau corporation stock currently sells for $58.32 per share. The market requires a return of 11.5% on the firm's stock. If the company maintains a constant 5% growth rate in dividends, what was the most recent dividend per share paid on the stock?
5. Stock R has a beta of 1.5, Stock S has a beta of 0.75. The expected return on an average stock is 13% and the risk-free rate is 7%. By how much does the required return on the riskier stock exceed that on the less risky stock?