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exam3b.ch6

# exam3b.ch6 - Name Webct User ID University of Houston C T...

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Name __________________________________ Webct User ID __________________________________ University of Houston C. T. Bauer College of Business Principles of Financial Management Finance 3332 Summer, 2007 Exam 3 B To receive full credit, show all work—equations in variable form, equations with numbers plugged in—and clearly indicate your answer. Point values are in parentheses. Use the following information for problems 1 -4. Stock Expected Return Beta Varianc e Covarianc e X 0.10 0.5 0.16 0.144 Y 0.20 1.9 0.36 1.  Calculate  the   standard deviation  of a  portfolio  consisting  of 40  percent  of the  funds  invested   in X and  60  percent  in Y. (10) 2.  Determine  the   beta  of a  portfolio  consisting  of 40  percent  of the  funds  invested  in X and  60   3.  Determine  the   expected return  of a  portfolio  consisting  of 40  percent  of the  funds  invested  in  X and  60  percent  in Y. (6) 4.  What is the  value  of the   correlation coefficient  of returns  between  stock  X and  stock  Y?  (6) 5.  Determine  the  expected  return  of a  portfolio  consisting  of the  following  investm ents.  (5) Stock Expected Return Investment A 20% \$100,000 B 30%   200,000 C 40%   700,000 6.  Given  the  following  possible  returns  over  the  coming  year  for Cryder,  Inc.,  determine  the   State Probabilit y Expected Return Rece s sio 20% -20% Normal 50% 30% Boom 30% 40% 7.  You  are  analyzing  a  stock  with a  beta  of 4.0.  The  risk- free  rate  is 4 percent,  and  the  expected

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exam3b.ch6 - Name Webct User ID University of Houston C T...

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