Question

1. Beale Manufacturing Company has a beta of 1.2, and Foley Industries has a beta of 0.9. The required return on an index fund that holds the entire stock market is 10.5%. The risk-free rate of interest is 7%. By how much does Beale's required return exceed Foley's required return?

2. Suppose you held a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio's beta is 1.83. Now suppose you decided to sell one of the stocks in your portfolio with a beta of 1.0 for $7,500 and use the proceeds to buy another stock with a beta of 2.04. What would your portfolio's new beta be?

3. Assume that the risk-free rate is 6% and the required return on the market is 12%. What is the required rate of return on a stock with a beta of 1.1? Round your answer to two decimal places.

4. An individual has $10,000 invested in a stock with a beta of 0.6 and another $70,000 invested in a stock with a beta of 2.0. If these are the only two investments in her portfolio, what is her portfolio's beta?

5.

A stock's returns have the following distribution:

Demand for theCompany's Products |
Probability of ThisDemand Occurring |
Rate of Return IfThis Demand Occurs |

Weak | 0.2 | (36%) |

Below average | 0.1 | (7) |

Average | 0.3 | 18 |

Above average | 0.2 | 27 |

Strong | 0.2 | 48 |

1.0 |

Assume the risk-free rate is 3%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places.

Stock's expected return: __ %

Standard deviation: __ %

Coefficient of variation:

Sharpe ratio:

Answer #1

=(1.2-0.9)*(10.5%-7%) =**1.05%**

2. Beta of New Portfolio =(Beta of 19 stocks*19+Beta of New
Stocks*1)/(Total Number of stocks)

=(1.83*19+2.04*1)/20 =**1.84**

3. Required Rate using CAPM =Risk Free Rate+beta*(Market return
-Risk Free Rate) =6%+1.1*(12%-6%) =**12.60%**

4. Portfolio Beta =weight of Stock 1*Beta 1+weight of Stock 2*Beta
2 =10000/(10000+70000)*0.6+70000/(10000+70000)*2=**1.83**

Beale Manufacturing Company has a beta of 1.2, and Foley
Industries has a beta of 0.4. The required return on an index fund
that holds the entire stock market is 8.5%. The risk-free rate of
interest is 6%. By how much does Beale's required return exceed
Foley's required return? Round your answer to two decimal
places

Beale Manufacturing Company has a beta of 1.2, and Foley
Industries has a beta of 0.50. The required return on an index fund
that holds the entire stock market is 9%. The risk-free rate of
interest is 4.5%. By how much does Beale's required return exceed
Foley's required return? Do not round intermediate calculations.
Round your answer to two decimal places.

Beale Manufacturing Company has a beta of 1.8, and Foley
Industries has a beta of 0.85. The required return on an index fund
that holds the entire stock market is 12.5%. The risk-free rate of
interest is 4.75%. By how much does Beale's required return exceed
Foley's required return? Round your answer to two decimal
places.

Beale Manufacturing Company has a beta of 1.4, and Foley
Industries has a beta of 0.8. The required return on an index fund
that holds the entire stock market is 10%. The risk-free rate of
interest is 6%. By how much does Beale's required return exceed
Foley's required return? Round your answer to two decimal
places.
%

10) Beale Manufacturing Company has a beta of 1.9, and Foley
Industries has a beta of 0.85. The required return on an index fund
that holds the entire stock market is 12%. The risk-free rate of
interest is 3%. By how much does Beale's required return exceed
Foley's required return? Round your answer to two decimal
places.
______%

Beale Manufacturing Company has a beta of 2.5, and Foley
Industries has a beta of 0.95. The required return on an index fund
that holds the entire stock market is 12.5%. The risk-free rate of
interest is 3.25%. By how much does Beale's required return exceed
Foley's required return? Do not round intermediate calculations.
Round your answer to two decimal places.

Beale Manufacturing Company has a beta of 1.1, and Foley
Industries has a beta of 0.40. The required return on an index fund
that holds the entire stock market is 11%. The risk-free rate of
interest is 3.5%. By how much does Beale's required return exceed
Foley's required return? Do not round intermediate calculations.
Round your answer to two decimal places.

A.)
A mutual fund manager has a $20 million portfolio with a beta of
1.50. The risk-free rate is 4.00%, and the market risk premium is
7.0%. The manager expects to receive an additional $5 million,
which she plans to invest in a number of stocks. After investing
the additional funds, she wants the fund's required return to be
17%. What should be the average beta of the new stocks added to the
portfolio? Do not round intermediate calculations. Round...

A stock's returns have the following distribution:
Demand for the
Company's Products
Probability of This
Demand Occurring
Rate of Return If
This Demand Occurs
Weak
0.2
(36%)
Below average
0.1
(7)
Average
0.3
18
Above average
0.2
27
Strong
0.2
48
1.0
Assume the risk-free rate is 3%. Calculate the stock's expected
return, standard deviation, coefficient of variation, and Sharpe
ratio. Do not round intermediate calculations. Round your answers
to two decimal places.
Stock's expected return: %
Standard deviation: %
Coefficient of...

A stock's returns have the following distribution:
Demand for the
Company's Products
Probability of This
Demand Occurring
Rate of Return If
This Demand Occurs
Weak
0.2
(22%)
Below average
0.1
(13)
Average
0.3
16
Above average
0.2
23
Strong
0.2
71
1.0
Assume the risk-free rate is 2%. Calculate the stock's expected
return, standard deviation, coefficient of variation, and Sharpe
ratio. Do not round intermediate calculations. Round your answers
to two decimal places.
Stock's expected return: %
Standard deviation: %
Coefficient of...

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