1. Expected returns ,T. Martell Inc.’s stock has a 50% chance of producing a 30% return, a 25% chance of producing a 9% return, and a 25% chance of producing a -25% return. What is Martell’s expected return?,,a. 14.4%,b. 15.2%,c. 16.0%,d. 16.8%,e. 17.6%,,2. Portfolio beta ,An investor has a 2-stock portfolio with $50,000 invested in Palmer Manufacturing and $50,000 in Nickles Corporation. Palmer’s beta is 1.20 and Nickles’ beta is 1.00. What is the portfolio’s beta?,,a. 0.94,b. 1.02,c. 1.10,d. 1.18,e. 1.26,,3. Portfolio beta,Tom Skinner has $45,000 invested in a stock with a beta of 0.8 and another $55,000 invested in a stock with a beta of 1.4. These are the only two investments in his portfolio. What is his portfolio’s beta?,,a. 0.93,b. 0.98,c. 1.03,d. 1.08,e. 1.13,,4. CAPM ,Magee Company’s stock has a beta of 1.20, the risk-free rate is 4.50%, and the market risk premium is 5.00%. What is Magee’s required return?,,a. 10.25%,b. 10.50%,c. 10.75%,d. 11.00%,e. 11.25%,,,,,,5. Coefficient of variation ,Miller Inc. is considering a capital budgeting project that has an expected return of 10% and a standard deviation of 30%. What is the project’s coefficient of variation?,,a. 1.8,b. 2.2,c. 2.6,d. 3.0,e. 3.4,,,6. Constant growth valuation ,A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 6.4%. What is the stock’s current price?,,a. $17.39,b. $17.84,c. $18.29,d. $18.75,e. $19.22,,7. Constant growth valuation ,A stock just paid a dividend of D0 = $1.50. The required rate of return is rs = 10.1%, and the constant growth rate is g = 4.0%. What is the current stock price?,,a. $23.11,b. $23.70,c. $24.31,d. $24.93,e. $25.57,,8. Constant growth valuation ,A share of common stock just paid a dividend of $1.00. If the expected long-run growth rate for this stock is 5.4%, and if investors’ required rate of return is 11.4%, what is the stock price?,,a. $16.28,b. $16.70,c. $17.13,d. $17.57,e. $18.01,,9. Expected dividend yield ,If D1 = $1.25, g (which is constant) = 4.7%, and P0 = $26.00, what is the stock’s expected dividend yield for the coming year?,,a. 4.12%,b. 4.34%,c. 4.57%,d. 4.81%,e. 5.05%,10. Expected dividend yield ,If D0 = $2.25, g (which is constant) = 3.5%, and P0 = $50, what is the stock’s expected dividend yield for the coming year?,,a. 4.42%,b. 4.66%,c. 4.89%,d. 5.13%,e. 5.39%,