Shahbaaz Syed; StudentID:

gjan17gl50

Strengths and Improvement Opportunities

CF2 Quiz1
Course: Corporate Finance 2 GMBA-GMBA Term 2 - Jan 2017‡Instructor: Sailee Parodkar ‡Questions: 10

My Score
(6/10)

QUESTION POINTS
CORRECT INCORRECT PARTIAL CREDIT
Bamas Entertainment
1 Bamas Entertainment has common stock with a beta of 1.46. The market return is 13.3 percent and the risk-free 1/1
rate is 4.6 percent. What is the market risk premium, stock risk premium and expected return on this stock?
ᅞA: 13.3%, 12.7%, 17.3%
ᅞB: 17.9%, 26.13%, 30.73%
ᅞC: 12.7%, 8.7%, 17.3%
ᅞD: 13.3%, 19.42%, 24.02%
ᅚE: 8.7%, 12.7%, 17.3%
The risk-free rate i
2 The risk-free rate is 4.2 percent and the expected return on the market is 12.3 percent. Stock A has a beta of 1.2 1/1
and an expected return of 13.1 percent. Stock B has a beta of 0.75 and an expected return of 11.4 percent. Are
these stocks correctly priced?
ᅚA: No, Stock A is overpriced and Stock B is underpriced
ᅞB: No, Stock A is underpriced and Stock B is overpriced
ᅞC: No, Stock A is overpriced but Stock B is correctly priced
ᅞD: No, Stock A is underpriced but Stock B is correctly priced
ᅞE: Yes, both stocks are correctly priced
Stock A has an expec
3 Stock A has an expected return of 15.6 percent and a beta of 1.27. Stock B has an expected return of 11.4 percent 0/1
and a beta of 0.89. Both stocks have the same reward-to-risk ratio. What is the risk-free rate?
ᅞA: 2.24
ᅞB: 1.65
ᅞC: 1.50
ᅚD: 1.56
ᅞE: 1.18
You currently own a
4 You currently own a portfolio valued at $80,000 that is equally as risky as the market. Given the information 0/1
below, what is the beta of Stock C?
ᅞA: 0.91
ᅞB: 0.94
ᅚC: 1
ᅞD: 1.4
ᅞE: 1.18
Given the following
5 Given the following information, what is the Standard Deviation of the portfolio return? 1/1
ᅞA: 0.7%
ᅚB: 13.75%
ᅞC: 8.5%
ᅞD: 1.89%
ᅞE: 9.5%
Given the following
6 Given the following information, what is the expected return on a portfolio rounded to nearest whole number? 0/1
ᅞA: 19%
ᅞB: 13%
ᅞC: 32%
ᅞD: 14%
ᅚE: 20%
 You want to create a
7 You want to create a $60,000 portfolio that consists of four stocks and has an expected return of 20 percent. 1/1
Currently, you own $16,700 of Stock A, $24,200 of Stock B and $10,000 of stock C. The expected return for Stock
A is 18.7 percent, for Stock B it is 11.2 percent and for Stock C it is 28.5 percent. What is the expected rate of
return for Stock D?
ᅞA: 34.65%
ᅚB: 36.45%
ᅞC: 35.56%
ᅞD: 39.55%
ᅞE: 37.66%
Fiddler's Music Stor
8 Fiddler's Music Stores' stock has a risk premium of 6.9 percent while the inflation rate is 4.1 percent, market 1/1
return is 8.7 percent and the risk-free rate is 3.9 percent. What is the expected return on this stock?
ᅚA: 10.8%
ᅞB: 12.6%
ᅞC: 8.0%
ᅞD: 11.0%
ᅞE: 15.6%
Southern Wear stock
9 Southern Wear stock has an expected return of 18.325 percent. Given the information below, what is the expected 0/1
return on this stock if the economy is normal? Round your answer to the nearest whole percentage.
Question Not Answered
ᅞA: 50%
ᅞB: 15%
ᅚC: 5%
ᅞD: 5.5%
ᅞE: 10%
Noah's Landing stock
10 Noah's Landing stock is expected to produce the following returns given the various states of the economy. What 1/1
is the expected return on this stock?
ᅞA: 11.87%
ᅞB: 11.01%
ᅞC: 12.32%
ᅚD: 11.78%
ᅞE: 1.187%

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