answers to ch 7 assignment
17. Since the stocks beta is equal to 1.2, its expected rate of return is 6 + 1.2(16 6) = 18
percent.
E(r) =
.18 =
P1 = $53
18. Assume that the $1,000 is a perpetuity. If beta is .5, the cash flow should be discounted at
the rat

Answers assignment # 2
12. Since A and B are perfectly negatively correlated, a risk-free portfolio can be created and
its rate of return in equilibrium will be the risk-free rate. To find the proportions of this
portfolio (with wA invested in A and wB =

Ch 5 answers questions for review
10. Expected return = .3 8% + .7 18% = 15% per year
Standard deviation = .7 28% = 19.6%
11. Investment proportions:
30.0% in T-bills
.7 27% =
18.9% in stock A
.7 33% =
23.1% in stock B
.7 40% =
28.0% in stock C
12. Your r

aNSWERS to selected Ch 14 questions
24. a. Bond price decreases by $80, calculated as follows:
10 0.01 800 = 80.00
b. 120 (.015)2 = .0135 = 1.35%
c. 9/1.10 = 8.18
d. (i)
e. (i)
f. (iii)
25. a. Modified duration =
If the Macaulay duration is 10 years and t

Chapter 14 from text
The following problems are based on questions that have appeared in past CFA examinations.
question 24
1.
A 6 percent coupon bond paying interest annually has a modified duration of 10 years, sells for
$800, and is priced at a yield t

DONT WORRY ABOUT LEADING AND TRAILING
these are from the text problems for review for test II
5.
Jand, Inc. currently pays a dividend of $1.22, which is expected to grow indefinitely at 5 percent. If the
current value of Jand's shares based on the constan