Unit 3 assignment

1) Chapter 5 problem, 5-2, p. 226- Wilson Wonders’s bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. What is their yield to maturity?

2) Chapter 6 problem, 6-7, p. 287 - Suppose rRF = 5%, rM = 10%, and rA = 12%.Calculate Stock A’s beta.

     a) calculate Stock A's beta

     b) If Stock A's beta were 2.0, then what would be A's new   

          required rate of return

3) Chapter 6 problem 6-11, p. 287 - You have a $2 million portfolio consisting of a $100,000 investment in each of 20 different stocks. The portfolio has a beta of 1.1. You are considering selling $100,000 worth of one stock with a beta of 0.9 and using the proceeds to purchase another stock with a beta of 1.4. What will the portfolio’s new beta be after these transactions?