exam3a.ch6 - Name Webct User ID University of Houston C T...

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

View Full Document Right Arrow Icon
Name __________________________________ Webct User ID __________________________________ University of Houston C. T. Bauer College of Business Principles of Financial Management Finance 3332 Summer, 2007 Exam 3 A 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. 1. You  are  analyzing  a stock  with a beta  of 2.0.  The  risk- free  rate  is 6 percent,  and  the  market  risk  premium  is 1   What is the  stock’s  equilibrium  required  rate  of return?  (6) 2. Referring  to the  information  in #1,  what is the  expected  return  on  the  market?  (2) 3. Given  the  following  possible  returns  over  the  coming  year  for Driason,  Inc.,  determine  the  stock’s  expected  re State Probabilit y Expected Return Reces sion 10% -30% Normal 50% 20% Boom 40% 40% 4. What is the  probability of earning  a return  of less  than  12  percent  on  a stock  whose  returns  are  normally  distri   with an  expected  return  of 8 percent  and  a standard  deviation  of 25  percent?  (8) 5. What is the  standard  deviation  of returns  for this  stock  given  the  following  historical  data  if its expected  return   percent?  (8) Year Observatio n Return 2006 1 -20% 2005 2 10% 2004 3 30% 2003 4 8% 6. Based  on  a stock’s  market  price,  you  estimate  a return  of 15  percent.  The  stock  has  a beta  of 1.6,  and  you  ca
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern