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1. Stocks A and B have the following probability distributions of expected future returns: ? B Probability 0.1 0.2 0.3 (12%) (32%) 4 0 13 19 0.3 24 26 0.1 35 46 a. Calculate the expected rate of return, rs, for Stock B (rA = 14.20%.) Do not round intermediate calculations. Round your answer to two decimal places. % b. Calculate the standard deviation of expected returns, OA, for Stock A (03 = 20.08%.) Do not round intermediate calculations. Round your answer to two decimal places. % c. Now calculate the coefficient of variation for Stock B. Round your answer to two decimal places. d. Is it possible that most investors might regard Stock B as being less risky than Stock A? I. If Stock B is more highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be less risky in a portfolio sense. II. If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense. III. If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense. IV. If Stock B is less highly correlated with the market than A, then it might have lower beta than Stock A, and hence be less risky in a portfolio sense. V. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense.
2. you will receive $17,000 in 7 months and another $11,000 in 21 months. If the discount rate is 7% per annum (compounding monthly) for the first 10 months, and 14% per annum (compounding monthly) for the next 11 months, what single amount received today would be equal to the two proposed payments? (answer to the nearest whole dollar; don’t include the $ sign or commas)
3. Moving Cash Flows What is the value in year 12 of a $1.700 cash flow made in year 5 when the interest rates are 9 percent? Multiple Choice $277100 $310767 $6041 781.53
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