FINS 1613
Tutorial Questions
1
SCHOOL OF BANKING AND FINANCE
FINS1613 BUSINESS FINANCE
Semester 2, 2010
TUTORIAL QUESTIONS
WEEK 8 – Risk & Return
Multiplechoice Questions
1. Which of these is the ‘risk premium’?
a. The return required by an investor on a risky security over and above the dividend rate of
return
b. The return required by an investor on a risky security over and above the market rate of
return
c. The return required by an investor on a risky security over and above the riskfree rate of
return
d. The return required by an investor on a risky security over and above the rate of return on
equity
2. What is the expected portfolio return given the following information?
Asset
Portfolio weight
E(ri)
A
0.1
15%
B
0.3
17%
C
0.4
25%
D
0.2
20%
3. An analyst has estimated how a particular stock’s return will vary.
Economy
Probability
Return
Recession
0.1
23%
Below average
0.1

8%
Average
0.4
6%
Above average
0.2
17%
Boom
0.2
24%
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FINS 1613
Tutorial Questions
2
What is the coefficient of variation of the company’s stock? (Use the population standard deviation,
not the sample standard deviation when calculating the coefficient of variation.)
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 Three '10
 DrKHShim
 Finance, Normal Distribution, Standard Deviation, Probability theory

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