Practice test 2

# Practice test 2 - Practice problems for Test 2 1 If a...

This preview shows pages 1–2. Sign up to view the full content.

Practice problems for Test 2 1. If a stock is overpriced it would plot: A) Above the security market line B) On the security market line C) Below the security market line D) On the Y-axis 2. If a firm uses the same company cost of capital for evaluating all projects, which of the following is likely? A) Rejecting good low risk projects B) Accepting poor high risk projects C) Both A and B D) Neither A nor B 3. A project has an expected cash flow of \$200, in year - 1. The risk-free rate is 6%, the market rate of return is 16%, and the project's beta is 1.5. Calculate the certainty equivalent cash flow for year -1. 4. The expected return on the market is estimated to be 12% and the risk-free rate is 4%. a) If the expected return on stock A is 14%, what is stock A’s beta? b) If the beta of stock B is 0.9, what is its expected return? c) What is the beta and the expected return of a portfolio with 30% invested in stock A and the rest in stock B? 5.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 02/27/2008 for the course FNCE 3010 taught by Professor Donchez,ro during the Spring '07 term at Colorado.

### Page1 / 3

Practice test 2 - Practice problems for Test 2 1 If a...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online