13) Amy bought a share of stock for $64.50 that paid a dividend of $.50 and sold
ID: 2708515 • Letter: 1
Question
13) Amy bought a share of stock for $64.50 that paid a dividend of $.50 and sold nine months later for $64.00. What was her dollar profit or loss and holding period return? 13) ______
A) -$0.50, -0.78%
B) $0.50, 0.78%
C) $0.00, 0.00%
D) There is no correct solution to this question.
14) Richard owns the following portfolio of securities. What is the beta for the portfolio?
Company
Beta
Percent of Portfolio
Apple
2.50
25%
Wells Fargo
0.65
50%
Ebay
1.70
25%
A) 1.62
B) 1.00
C) 1.38
D) 0.65
15) Assume the following information about the market and JumpMasters' stock. JumpMasters' beta = 1.50, the risk-free rate is 3.50%, the market risk premium is 10.0%. Using the SML, what is the expected return for JumpMasters' stock?
A) 13.50%
B) 7.50%
C) 18.50%
D) 27.00%
16) Given the expected returns and probabilities of various states of the world in this table, what is the expected return for Carbide Company?
Carbide Company
State of the Economy
Probability of State
Return on State
Boom
.30
18%
Steady
.55
10%
Recession
.15
-5%
A) 5.50%
B) 10.15%
C) -0.75%
D) 5.40%
17) Geronimo, Inc. is considering a project that has an initial after-tax outlay or after-tax cost of $220,000. The respective future cash inflows from its four-year project for years 1 through 4 are: $50,000, $60,000, $70,000 and $80,000. Geronimo uses the net present value method and has a discount rate of 11%. Will Geronimo accept the project? 17) ______
A) Geronimo rejects the project because the NPV is about -$2,375.60.
B) Geronimo rejects the project because the NPV is about -$12,375.60.
C) Geronimo rejects the project because the NPV is about -$22,375.73.
D) Geronimo accepts the project because the NPV is greater than $10,000.00.
Company
Beta
Percent of Portfolio
Apple
2.50
25%
Wells Fargo
0.65
50%
Ebay
1.70
25%
Explanation / Answer
13) C
14)2.5*.25+.65*.5+1.7*.25=1.375
15)A
16)B - 10 .15%
17)NPV = - $22,375.73
No , Geronimo Will not accept the project
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