Question 1
You have chosen biology as your college major because you
would like to be a medical doctor. However, you find that the probability of
being accepted into medical school is about 10 percent. If you are accepted
into medical school, then your starting salary when you graduate will be
$300,000 per year. However, if you are not accepted, then you would choose to
work in a zoo, where you will earn $40,000 per year. Without considering the
additional educational years or the time value of money, what is your expected
starting salary as well as the standard deviation of that starting salary?
Expected Salary $42,000; Std. Deviation $81,000
Expected Salary $54,000; Std. Deviation $78,000
Expected Salary $66,000; Std. Deviation $78,000
None of the above
Question 2
Given the returns and probabilities for the three possible
states listed here, calculate the covariance between the returns of Stock A and
Stock B. For convenience, assume that the expected returns of Stock A and Stock
B are 0.09 and 0.16, respectively.
Probability Return(A) Return(B)
Good 0.35 0.30 0.50
OK 0.50 0.10 0.10
Poor 0.15 -0.25 -0.30
Question 3
In order to fund her retirement, Michele requires a
portfolio with an expected return of 0.11 per year over the next 30 years. She
has decided to invest in Stocks 1, 2, and 3, with 25 percent in Stock 1, 50
percent in Stock 2, and 25 percent in Stock 3. If Stocks 1 and 2 have expected
returns of 0.11 and 0.09 per year, respectively, then what is the minimum
expected annual return for Stock 3 that will enable Michele to achieve her
investment requirement?
Question 4
The risk per unit of return is measured by the
coefficient of variation
median.
variance.
standard deviation.
Question 5
Lee purchased a stock one year ago for $25. The stock is now
worth $33, and the total return to Lee
for owning the stock was 0.39. What is the
dollar amount of dividends that he received for owning the stock during
the year?
Question 6
The beta of M Simon Inc., stock is 1.7, whereas the
risk-free rate of return is 0.07. If the
expected return on the market is 0.13 percent, then what is the expected return on M Simon Inc?
Question 7
London purchased a piece of real estate last year for
$84,900. The real estate is now worth
$100,000. If London needs to have a total return of 0.23 during the year, then
what is the dollar amount of income that she needed to have to reach her objective?
Question 8
The risk-free rate of return is currently 0.03, whereas the
market risk premium is 0.06. If the beta of RKP, Inc., stock is 1.9, then what
is the expected return on RKP?
Question 1You have chosen biology as your college major because you
would like to be a medical doctor. However, you find that the probability of
being accepted into medical school is about 10 percent. If you are accepted
into medical school, then your starting salary when you graduate will be
$300,000 per year. However, if you are not accepted, then you would choose to
work in a zoo, where you will earn $40,000 per year. Without considering the
additional educational years or the time value of money, what is your expected
starting salary as well as the standard deviation of that starting salary? Expected Salary $42,000; Std. Deviation $81,000 Expected Salary $54,000; Std. Deviation $78,000 Expected Salary $66,000; Std. Deviation $78,000 None of the aboveQuestion 2Given the returns and probabilities for the three possible
states listed here, calculate the covariance between the returns of Stock A and
Stock B. For convenience, assume that the expected returns of Stock A and Stock
B are 0.09 and 0.16, respectively. Probability Return(A) Return(B)Good 0.35 0.30 0.50OK 0.50 0.10 0.10Poor 0.15 -0.25 -0.30 Question 3In order to fund her retirement, Michele requires a
portfolio with an expected return of 0.11 per year over the next 30 years. She
has decided to invest in Stocks 1, 2, and 3, with 25 percent in Stock 1, 50
percent in Stock 2, and 25 percent in Stock 3. If Stocks 1 and 2 have expected
returns of 0.11 and 0.09 per year, respectively, then what is the minimum
expected annual return for Stock 3 that will enable Michele to achieve her
investment requirement?Question 4The risk per unit of return is measured by the coefficient of variation median. variance. standard deviation.Question 5Lee purchased a stock one year ago for $25. The stock is now
worth $33, and the total return to Lee
for owning the stock was 0.39. What is the
dollar amount of dividends that he received for owning the stock during
the year? Question 6The beta of M Simon Inc., stock is 1.7, whereas the
risk-free rate of return is 0.07. If the
expected return on the market is 0.13 percent, then what is the expected return on M Simon Inc? Question 7London purchased a piece of real estate last year for
$84,900. The real estate is now worth
$100,000. If London needs to have a total return of 0.23 during the year, then
what is the dollar amount of income that she needed to have to reach her objective? Question 8The risk-free rate of return is currently 0.03, whereas the
market risk premium is 0.06. If the beta of RKP, Inc., stock is 1.9, then what
is the expected return on RKP?
