Questions -
Q1. Four months ago, you purchased 1,200 shares of Lakeside Bank stock for $23.32 a share. You have received dividend payments equal to $.57 a share. Today, you sold all of your shares for $24.32 a share. What is your total dollar return on this investment?
Q2. Last year, you purchased a stock at a price of $53 a share. Over the course of the year, you received $1.4 in dividends and inflation averaged 2.7 percent. Today, you sold your shares for $54.5 a share. What is your approximate real rate of return on this investment?
Q3. You purchased 300 shares of Deltona stock for $43.90 a share. You have received a total of $630 in dividends and $14,620 in proceeds from selling the shares. What is your capital gains yield on this stock?
Q4. What are the portfolio weights for a portfolio that has 122 shares of Stock A that sell for $32 per share and 102 shares of Stock B that sell for $22 per share?
Portfolio weights
Stock A
Stock B
Q5. You own a portfolio that has $2,900 invested in Stock A and $3,900 invested in Stock B. If the expected returns on these stocks are 7 percent and 10 percent, respectively, what is the expected return on the portfolio?
Q6. You own a portfolio that is 32 percent invested in Stock X, 22 percent in Stock Y, and 46 percent in Stock Z. The expected returns on these three stocks are 8 percent, 14 percent, and 10 percent, respectively. What is the expected return on the portfolio?
Q7. Based on the following information:
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State of Economy
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Probability of State of Economy
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Rate of Return If State Occurs
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Stock A
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Stock B
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Recession
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.22
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.07
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- .22
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Normal
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.52
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.10
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.07
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Boom
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.26
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.15
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.24
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Calculate the expected return for the two stocks.
Calculate the standard deviation for the two stocks.
Q8. You own a stock portfolio invested 35 percent in Stock Q, 20 percent in Stock R, 30 percent in Stock S, and 15 percent in Stock T. The betas for these four stocks are .77, 1.15, 1.16, and 1.33, respectively. What is the portfolio beta?
Q9. You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.59 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?
Q10. A stock has a beta of 1.08, the expected return on the market is 10 percent, and the risk-free rate is 3.5 percent. What must the expected return on this stock be?
Q11. A stock has an expected return of 16.5 percent, its beta is 1.30, and the risk-free rate is 6.5 percent. What must the expected return on the market be?
Q12. A stock has a beta of 1.25 and an expected return of 15 percent. A risk-free asset currently earns 3.2 percent.
a. What is the expected return on a portfolio that is equally invested in the two assets?
b. If a portfolio of the two assets has a beta of .75, what are the portfolio weights?
c. If a portfolio of the two assets has an expected return of 9 percent, what is its beta?
d. If a portfolio of the two assets has a beta of 2.50, what are the portfolio weights?
Q13. You recently purchased a stock that is expected to earn 13 percent in a booming economy, 8 percent in a normal economy and lose 7 percent in a recessionary economy. There is a 13 percent probability of a boom, a 76 percent chance of a normal economy. What is your expected rate of return on this stock?
Q14. The risk-free rate of return is 5 percent and the market risk premium is 9 percent. What is the expected rate of return on a stock with a beta of 1.28?
Q15. Which one of the following stocks is correctly priced if the risk-free rate of return is 2.4 percent and the market risk premium is 7.70 percent?
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Stock
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Beta
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Expected Return
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A
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0.73
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8.52%
|
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B
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1.49
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13.90%
|
|
C
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1.40
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13.18%
|
|
D
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1.06
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10.57%
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E
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0.98
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9.90%
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