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1. Calculating Portfolio Betas
You own a portfolio equally invested in a riskfree asset and two stocks. If one of the stocks has a beta of 0.95 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?
a.2.05
b.1.10
c.1.05
d.1.95
e.2.15
2. Using CAPM
A stock has a beta of 1.3, the expected return on the market is 15 percent, and the risk-free rate is 9 percent. What must the expected return on this stock be?
a.17.47%
b.28.5%
c.15.96%
d.16.8%
e.17.64%
Twice Shy Industries has a debt−equity ratio of 1.2. Its WACC is 9 percent, and its cost of debt is 5.7 percent. The corporate tax rate is 35 percent. What is the company’s cost of equity capital? What is the company’s unlevered cost of equity capita..
The owners’ equity accounts for Alexander International are show below: How many shares will be outstanding? What is the new par value per share?
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Warren Buffet’s strategy related for his stock portfolio over the past several decades was to buy U.S. “blue chip” companies, paying high dividends, and hold the position for the long term. Assess the effectiveness of using this strategy in today’s m..
Sunset, Inc., has a book value of equity of $13,920. Long-term debt is $8,000. Net working capital, other than cash, is $2,090. Fixed assets are $19,130 and current liabilities are $1,730. How much cash does the company have? What is the value of the..
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