Finance Questions

1. Scheuer Enterprises has a beta of 1.10, the real risk-free rate is 2.00%, investors expect a 3.00% future inflation rate, and the market risk premium is 4.70%. What is Scheuer's required rate of return?

a. 9.67% b. 10.17%

c. 9.92%

d. 9.43%

e. 10.42%

 

2. Suppose rRF = 5%, rM = 8%, and rA = 14%. a. Calculate Stock A's beta. Round your answer to two decimal places.

b. If Stock A's beta were 2.0, then what would be A's new required rate of return?

Round your answer to two decimal places. %

 

3. Suppose you manage a $5.08 million fund that consists of four stocks with the following investments: Stock Investment Beta

A $420,000 1.50

B 750,000 -0.50

C 1,460,000 1.25

D 2,450,000 0.75

If the market's required rate of return is 8% and the risk-free rate is 4%, what is the fund's required rate of return? Round your answer to two decimal places. %  

4. Stock R has a beta of 1.2, Stock S has a beta of 0.85, the expected rate of return on an average stock is 10%, and the risk-free rate is 6%. By how much does the required return on the riskier stock exceed the required return on the riskier stock exceed that on the less risky stock? Round your answer to two decimal places. %  

5. An individual has $45,000 invested in a stock with a beta of 0.4 and another $70,000 invested in a stock with a beta of 1.1. If these are the only two investments in her portfolio, what is her portfolio's beta? Round your answer to two decimal places. 6.  Assume that you manage a $10.00 million mutual fund that has a beta of 1.05 and a 9.50% required return. The risk-free rate is 4.20%. You now receive another $5.00 million, which you invest in stocks with an average beta of 0.65. What is the required rate of return on the new portfolio? (Hint: You must first find the market risk premium, then find the new portfolio beta.)

a. 8.83% b. 9.05%

c. 9.51%

d. 9.74%

e. 9.27%

 

7. Assume that the risk-free rate is 3% and that the market risk premium is 3%. What is the required rate of return on a stock with a beta of 1.1? Round your answer to two decimal places. % What is the required rate of return on a stock with a beta of 1.7? Round your answer to two decimal places. %