{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

midsamp2solutions

# midsamp2solutions - University of California Berkeley Haas...

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

1 University of California - Berkeley Haas School of Business UGBA 103 Sample Midterm 2 Instructions: This is a 1.5 hour closed book and closed note exam, though you may refer to notes on one side of a 3” x 5” index card. There are a total of 100 points. You may use a calculator, but no computers are allowed. Show all your work. Write down any equation you are using to allow us to provide as much credit as possible. This test contains 4 pages. The last question is #5 . All answers should be written in the space provided under each question. 1. 10 points. You have the following information: Risk free interest rate: r Expected return on market portfolio: R m Beta of stock X: β Assuming the CAPM holds, what is the expected return on stock X? R x = r + β (R m – r) 2. 20 points A project has the following cash flows: Period 0 1 2 CF -100 230 -132 Which, if any, of the following are IRRs for this project? 10%, 15%, 20%, 25%. Are there any other IRRs? Should you undertake the project if the return you expect on other projects with this level of risk is 8%? 0 ) 1 ( 132 1 230 100 2 = + + + = IRR IRR NPV Candidate IRR NPV 10% 0.00 15% 0.189 20% 0.00 25% -0.480 So there are two IRRs: 10% and 20% There can be no other IRRs because two sign changes indicates there are at most two solutions.

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.

{[ snackBarMessage ]}

### Page1 / 4

midsamp2solutions - University of California Berkeley Haas...

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

View Full Document
Ask a homework question - tutors are online