Test bank - chapter 8

# Test bank - chapter 8 - CHAPTER 8 RISK AND RATES OF RETURN...

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8 RISK AND RATES OF RETURN 1, T. Martell Inc.'s stock has a 50% chance of producing a 30% return, a 25% chance of producing a 9% return, and a 25% chance of producing a -25% return. What is Martell's expected return? a. 14.4% b. 15.2% c. 16.0% d. 16.8% e. 17.6% 3, Tom Skinner has \$45,000 invested in a stock with a beta of 0.8 and another \$55,000 invested in a stock with a beta of 1.4. These are the only two investments in his portfolio. What is his portfolio’s beta? a. 0.93 b. 0.98 c. 1.03 d. 1.08 e. 1.13 4, Magee Company's stock has a beta of 1.20, the risk-free rate is 4.50%, and the market risk premium is 5.00%. What is Magee's required return? a. 10.25% b. 10.50% c. 10.75% d. 11.00% e. 11.25% 5, Miller Inc. is considering a capital budgeting project that has an expected return of 10% and a standard deviation of 30%. What is the project's coefficient of variation? a. 1.8 b. 2.2 c. 2.6 d. 3.0 e. 3.4 6, You are given the following returns on the Market and on Stock A. Calculate Stock A's beta coefficient.

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## This note was uploaded on 01/18/2011 for the course FINANCE fin300 taught by Professor Thomasrhee during the Fall '10 term at CSU Long Beach.

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Test bank - chapter 8 - CHAPTER 8 RISK AND RATES OF RETURN...

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