Administered in class: 1 June 2016 Quiz 2: Risk/ Return Calculations Chapter 5 and Chapter 6 Name(s): _________________________________________...
Administered in class: 1 June 2016
Quiz 2: Risk/ Return Calculations Chapter 5 and Chapter 6Name(s): _________________________________________ Score: _____________
Directions: Be sure to begin by writing the formula used to solve the problem (2 points each) using the Equation function.
Compute the expected return given these three economic states, their likelihoods, and the potential returns:
Economic state | Probability | Return |
Fast growth | 10% | 50% |
Slow growth | 60% | 8.0% |
Recession | 30% | -10% |
HillCom Corp stock was $75.00 per share at the end of last year. Since then, it paid a $2.50 per share dividend last year. The stock price is currently $78.00. If you owned 200 shares of HillCom, what was your holding period return?
DirectWay stock was $45.00 per share at the end of last year. Since then, it paid a $1.25 per share dividend last year. The stock price is currently $43.50. If you owned 1000 shares of DirectWay, what was your holding period return?
Determine which one of these three portfolios dominates another. Name the dominated portfolio and the portfolio that dominates it. Portfolio Blue has an expected return of 14% and risk of 19%. The expected return and risk of portfolio Yellow are 15% and 18%, and for the Purple portfolio are 16% and 21%. In order for a portfolio to dominate another, it must have at least the same or higher return at less than or equal to risk.
Determine which one of the three portfolios dominates another. Name the dominated portfolio and the portfolio that dominates it. Portfolio Green has an expected return of 10 percent and risk of 16 percent. The expected return and risk of portfolio Red are 16 percent and 20 percent, and for the Orange portfolio are 16 percent and 19 percent.
An investor owns $10,000 of Adobe Systems stock, $15,000 of Dow Chemical, and $25,000 of Office Depot. What are the portfolio weights of each stock?
Year-to-date, Company O had earned a -2.10% return. During the same time period, Company V earned 8.00% and Company M earned 6.25%. If you have a portfolio made up of 40% Company O, 30% Company V, and 30% Company M, what is your portfolio return?
Year to date, Company Y had earned a 5.25 percent return. During the same time period, Company R earned 6 percent and Company C earned -1.25 percent. If you have a portfolio made up of 20 percent Y, 50 percent R, and 30 percent C, what is your portfolio return?
If the annual return on the S&P 500 Index was 12.4%. The annual T-bill yield during the same period was 5.7%. What was the market risk premium during that year?
A company has a beta of 0.50. If the market return is expected to be 12 percent and the risk-free rate is 5 percent, what is the company's required return?
A company has a beta of 0.75. If the market return is expected to be 16 percent and the risk-free rate is 6 percent, what is the company's required return?
You have a portfolio with a beta of 0.9. What will be the new portfolio beta if you keep 40% of your money in the old portfolio and 60% in a stock with a beta of 1.5?
You have a portfolio with a beta of 1.25. What will be the new portfolio beta if you keep 80 percent of your money in the old portfolio and 20 percent in a stock with a beta of 1.75?
Compute the standard deviation of the expected return given these three economic states, their likelihoods, and the potential returns:
Economic state | Probability | Return |
Fast growth | 10% | 50% |
Slow growth | 60% | 8% |
Recession | 30% | -10% |
You own $2,000 of City Steel stock that has a beta of 2.5. You also own $8,000 of Rent-N-Co (beta = 1.9) and $4,000 of Lincoln Corporation (beta = 0.25). What is the beta of your portfolio?