exam2d.ch5partialch5Ach6ch7ch8 - Name Peoplesoft Number...

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Name __________________________________ Peoplesoft Number __________________________________ University of Houston C. T. Bauer College of Business Finance 3332 Fall, 2010 Exam 2D To receive full credit: Show all work—equations in variable form & equations with numbers plugged in, unless instructed differently Clearly indicate your (one) answer Calculator financial function inputs must be shown. All inputs to find annuity factor must be shown Carry all decimals, rounding only final answer Decimal places should be rounded to 4 places (2 in percent form) Currency answers rounded to the nearest cent, where applicable Include applicable units ($, %, etc.) on answers Point values are in parentheses. Use the following information for problems 1 – 3. Security Expected Return (%) Beta Standard Deviation (%) Correlation Coefficient X 6 0.8 σ X  = 20 Ρ X,Y  = 0.2 Y 10 1.2 σ Y  = 30 Ρ X,Z  = 0.6 Z 14 2.0 σ Z  = 40 Ρ Y,Z  = 0.8 1.  Determine  the   beta  of a  portfolio  consisting  of 70  percent  of the  funds  invested  in stock  Y and  30  percent  in stock   (2) 2.  Calculate  the   standard deviation  of a  portfolio  consisting  of 70  percent  of the  funds  invested  in stock  Y and  30   percent  in stock  Z. Pleas e  show  equation  in variable  form  and  equation  with numb ers  plugged  in. (8) 3.  What is the  value  of the   covariance  of returns  between  stocks  Y and  Z? (4) 4.  Write  the  equation  in  variable form  for calculating  the  standard  deviation  of a  portfolio  consisting  of three   securities.  (4) 5.  You  are  analyzing  a  stock  with a  beta  of 1.6.  The  risk- free  rate  is 5 percent,  and  the  expected  return  on  the  m   9%.  What is the  stock’s  equilibrium  required  rate  of return?  (6)
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6.  Circle  the  correct  answer.  (4)  Based  on  a  stock’s  market  price,  you  estimate  a  return  of 16  percent.  The  stock  has  a  
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exam2d.ch5partialch5Ach6ch7ch8 - Name Peoplesoft Number...

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