PRINT - that your firm's stock will have a -1% return if...

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2) You have been managing a $1 million portfolio. The portfolio has a beta of 1.7 and a required rate of return of 14%. The current risk-free rate is 4%. Assume that you receive another $300,000. If you invest the money in a stock that has a beta of 0.7, what will be the required return on your $1.3 million portfolio? 3) The risk-free rate is 4%. Stock A has a beta = 1.05 and Stock B has a beta = 1.40. Stock A has a required return of 11.0%. What is Stock B's required return? 4) An investment analyst estimates a 1/3 chance the economy will be weak, a 1/3 chance the economy will be average, and a 1/3 chance the economy will be strong. The analyst estimates
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Unformatted text preview: that your firm's stock will have a -1% return if the economy is weak, a 11% return if the economy is average, and a 35% return if the economy is strong. On the basis of this estimate, what is the coefficient of variation for your firm's stock? 5) A stock has a required return of 11.00%. The beta of the stock is 1.10 and the risk-free rate is 4.00%. What is the market risk premium? 6) Portfolio P has 40% invested in Stock X and 60% in Stock Y. The risk-free rate of interest is 6% and the market risk premium is 4%. Portfolio P has a required return of 12% and Stock X has a beta of 0.70. What is the beta of Stock Y?...
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This note was uploaded on 06/09/2011 for the course ECONOMICS 101 taught by Professor Kizlik during the Spring '11 term at FAU.

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