exam2a.ch6ch7ch8 - Name _ PeopleSoft # _ University of...

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Name __________________________________ PeopleSoft # __________________________________ University of Houston C. T. Bauer College of Business Finance 3332 Principles of Financial Management Spring, 2010 Exam 2A Point values are in parentheses. To receive full credit: Clearly indicate your answer Financial functions may be used, but all inputs must be clearly shown Carry all decimals, rounding only final answer Final answer decimal places should be rounded to four places (two in percent form) Currency answers rounded to the nearest cent, where applicable Include applicable units on answers Use the following information for problems 1 – 3. Stock Expected Return Beta Variance Covariance (σ i,j ) A 0.08 0.5 0.04 σ A,B = 0.030 B 0.12 1.1 0.09 1. Calculate the expected return of a portfolio consisting of 10 percent of the funds invested in stock A and 90 percent in stock B. (4) 2. Calculate the standard deviation of a portfolio consisting of 10 percent of the funds invested in stock A and 90 percent in stock B. (8) 3. What is the correlation coefficient of returns between stocks A and B? (6) 4. What is the value per share of a $2 preferred stock with a $100 par value if the required rate of return is 7 percent? (4) 5. IMB Incorporated’s common stock just paid a dividend of $0.25 per share. What is the value per share of the firm’s common stock if earnings and dividends are expected to grow at a rate of 8 percent for the foreseeable future, and investors require a 14 percent return? (6) 6. Circle
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exam2a.ch6ch7ch8 - Name _ PeopleSoft # _ University of...

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