11. A project has the following cash flows - $550.00 $250.00 $260.00 $280.00 0 A

Question

11. A project has the following cash flows - $550.00 $250.00 $260.00 $280.00 0 Assuming a discount rate of 10% and a reinvestmentrate of 5%,what internal rate of return (MIRR)? is the modiied (Note: the cash flow in Year 0 is negative) A. 13.95% B. 20.11% C. 14.64% D. 16.45% 11? 12. What is the modified net present value (MNPV) for the project in question A. $180.32 B. $72.56 C. $102.52 D. $278.63 risk-free rate is 3% and the market premium is 6%. Security X has a CAPM beta of 0.75 and Security Y has a CAPM beta of 1.20. What is the expected return (i.e -13. The the mean return) of a portfolio composed of equal amounts invested in X and Y? A. 5.85% B. 8.85% C. 5.93% D. 7.25% -14. A portfolio on the Capital Market Line (CML) has a mean return equal to: 15. Which statement is true? A. The Treynor Measure is the slope of the Security Market Line (SML). B. Jensen's alpha and the Sharpe Ratio are equivalent methods for selecting undervalued stocks The Treynor Measure is preferred to the Sharpe Ratio when markets are not well developed. C. D. The Security Market Line (SNL) is tangent to the efficient frontier.

Explanation / Answer

Q11 Year 0 1 2 3 Cash flows -550 250 260 280 MIRR 14.64% Q12 Year 0 1 2 3 Cash flows -550 250 260 280 Reinvested cash flows 262.5 275.625 Reinvested cash flows 273 Total cash flows -550 250 272.5 306.125 MPNV 72.56 Q13 Risk free rate 3% Market premium 6% Beta_X 0.75 Beta_Y 1.2 Using CAPM calculate the return of X and Y Return_X 7.500% Return_Y 10.200% With equal weighted portfolio Return_portfolio 8.85% Q14 It will be Rf + Wrf*(Kmkt - Rf) Answer will be C Q15 Treynor's ratio is the slope of security market line3 Answer will be A

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