26 Jul WHAT ARE THE PORTFOLIO WEIGHTS OF EACH STOCK?
What is the taxable equivalent yield on a municipal bond with a yield to maturity of 4.5 percent for Show more What is the taxable equivalent yield on a municipal bond with a yield to maturity of 4.5 percent for an investor in the 39 percent marginal tax bracket? 1.76 percent 4.50 percent 7.38 percent 11.54 percent Rank the following bonds in order from lowest credit risk to highest risk all with the same time to maturity by their yield to maturity: JM Corporate bond with yield of 12.25 percent IB Corporate bond with yield of 4.49 percent TC Corporate bond with yield of 8.76 percent and B&O Corporate bond with a yield of 5.99 percent. JM bond TC bond B&O bond IB bond IB bond B&O bond TC bond JM bond TC bond B&O bond IB bond JM bond JM bond IB bond B&O bond TC bond A 5.75 percent coupon bond with 12 years left to maturity is offered for sale at $978.83. What yield to maturity is the bond offering? (Assume interest payments are paid semi-annually and par value is $1000.) 3.00 percent 3.09 percent 5.75 percent 6.00 percent A client in the 28 percent marginal tax bracket is comparing a municipal bond that offers a 3.25 percent yield to maturity and a similar-risk corporate bond that offers a 4.10 percent yield. Which bond will give the client more profit after taxes? The municipal bond. The corporate bond. Both give the client equal profits after taxes. There is not enough information given to determine answer. Portfolio Weights An investor owns $15000 of Adobe Systems stock $15500 of Dow Chemical and $17000 of Office Depot. What are the portfolio weights of each stock? Adobe System = 0.3333 Dow Chemical = 0.3333 Office Depot = 0.3333 Adobe System = 0.3158 Dow Chemical = 0.3263 Office Depot = 0.3579 Adobe System = 0.3263 Dow Chemical = 0.3158 Office Depot = 0.3579 Adobe System = 0.2667 Dow Chemical = 0.3333 Office Depot = 0.4000 Portfolio Return Year-to-date Company O had earned a -7.4 percent return. During the same time period Company V earned 9.65 percent and Company M earned 2.68 percent. If you have a portfolio made up of 20 percent Company O 40 percent Company V and 40 percent Company M what is your portfolio return? 4.93% 6.41% 3.45% 19.73% Average Return The past five monthly returns for K and Company are 4.55 percent 4.72 percent -.65 percent -.15 percent and 9.30 percent. What is the average monthly return? 3.874% 1.614% 1.481% 3.554% Portfolio Weights If you own 270 shares of Air Line Inc at $18.95 170 shares of BuyRite at $9.9 and 370 shares of Motor City at $45.95 what are the portfolio weights of each stock? Air Line = .2700 BuyRite = .1700 MotorCity = .3700 Air Line = .3333 BuyRite = .3333 MotorCity = .3333 Air Line = .3333 BuyRite = .2099 MotorCity = .4568 Air Line = .2150 BuyRite = .0707 MotorCity = .7143 Portfolio Return At the beginning of the month you owned $6500 of Company G $8900 of Company S and $2800 of Company N. The monthly returns for Company G Company S and Company N were 8.15 percent -1.59 percent and -.14 percent. What is your portfolio return? 2.14% 6.42% 3.29% 2.13% The standard deviation of the past five monthly returns for PG Company are 2.75 percent -0.75 percent 4.15 percent 6.29 percent and 3.84 percent. What is the standard deviation? 2.309 percent 2.581 percent 3.256 percent 3.406 percent Rank the following three stocks by their risk-return relationship best to worst. Rail Haul has an average return of 10 percent and standard deviation of 19 percent. The average return and standard deviation of Idol Staff are 12 percent and 22 percent; and of Poker-R-Us are 11 percent and 25 percent. Idol Staff Rail Haul Poker-R-Us Rail Haul Idol Staff Poker-R-Us Idol Staff Poker-R-Us Rail Haul Poker-R-Us Rail Haul Idol Staff Which of the following statements is correct? A single stock has a lot of diversifiable risk. A single stock has more market risk than a diversified portfolio of stocks. Bonds and stocks have a high correlation because they are both financial assets. None of these statements is correct. Which of the following statements is correct with regards to diversification? Diversifying reduces the return of the portfolio. Diversifying reduces the market risk of the portfolio. Diversifying reduces the dollar return of the portfolio. None of these statements is correct. Expected Return Compute the expected return given these three economic states their likelihoods and the potential returns: Economic State Probability Return Fast Growth .1 29% Slow Growth .8 14% Recession .1 -29% 14.0% 14.3% 11.2% 17.0% Risk Premium If the annual return on the S&P 500 Index was 14.00 percent. The annual T-bill yield during the same period was 6.50 percent. What was the market risk premium during that year? 20.50% 14.00% 7.50% 6.50% CAPM Required Return A company has a beta of .69. If the market return is expected to be 13.9 percent and the risk-free rate is 5.95 percent what is the companys required return? 11.44% 15.54% 17.39% 9.59% Portfolio Beta You have a portfolio with a beta of .94. What will be the new portfolio beta if you keep 40 percent of your money in the old portfolio and 60 percent in a stock with a beta of 1.54? 1.24 1.00 1.30 2.48 Under/Over Valued Stock A manager believes his firm will earn a 17.8 percent return next year. His firm has a beta of 1.68 the expected return on the market is 15.8 percent and the risk-free rate is 5.8 percent. Compute the return the firm should earn given its level of risk and determine whether the manager is saying the firm is under-valued or over-valued. 22.6% under-valued 27.544% under-valued 27.544% over-valued 22.6% over-valued What is the taxable equivalent yield on a municipal bond with a yield to maturity of 4.5 percent for an investor in the 39 percent marginal tax bracket? 1.76 percent 4.50 percent 7.38 percent 11.54 percent Rank the following bonds in order from lowest credit risk to highest risk all with the same time to maturity by their yield to maturity: JM Corporate bond with yield of 12.25 percent IB Corporate bond with yield of 4.49 percent TC Corporate bond with yield of 8.76 percent and B&O Corporate bond with a yield of 5.99 percent. JM bond TC bond B&O bond IB bond IB bond B&O bond TC bond JM bond TC bond B&O bond IB bond JM bond JM bond IB bond B&O bond TC bond A 5.75 percent coupon bond with 12 years left to maturity is offered for sale at $978.83. What yield to maturity is the bond offering? (Assume interest payments are paid semi-annually and par value is $1000.) 3.00 percent 3.09 percent 5.75 percent 6.00 percent A client in the 28 percent marginal tax bracket is comparing a municipal bond that offers a 3.25 percent yield to maturity and a similar-risk corporate bond that offers a 4.10 percent yield. Which bond will give the client more profit after taxes? The municipal bond. The corporate bond. Both give the client equal profits after taxes. There is not enough information given to determine answer. Portfolio Weights An investor owns $15000 of Adobe Systems stock $15500 of Dow Chemical and $17000 of Office Depot. What are the portfolio weights of each stock? Adobe System = 0.3333 Dow Chemical = 0.3333 Office Depot = 0.3333 Adobe System = 0.3158 Dow Chemical = 0.3263 Office Depot = 0.3579 Adobe System = 0.3263 Dow Chemical = 0.3158 Office Depot = 0.3579 Adobe System = 0.2667 Dow Chemical = 0.3333 Office Depot = 0.4000 Portfolio Return Year-to-date Company O had earned a -7.4 percent return. During the same time period Company V earned 9.65 percent and Company M earned 2.68 percent. If you have a portfolio made up of 20 percent Company O 40 percent Company V and 40 percent Company M what is your portfolio return? 4.93% 6.41% 3.45% 19.73% Average Return The past five monthly returns for K and Company are 4.55 percent 4.72 percent -.65 percent -.15 percent and 9.30 percent. What is the average monthly return? 3.874% 1.614% 1.481% 3.554% Portfolio Weights If you own 270 shares of Air Line Inc at $18.95 170 shares of BuyRite at $9.9 and 370 shares of Motor City at $45.95 what are the portfolio weights of each stock? Air Line = .2700 BuyRite = .1700 MotorCity = .3700 Air Line = .3333 BuyRite = .3333 MotorCity = .3333 Air Line = .3333 BuyRite = .2099 MotorCity = .4568 Air Line = .2150 BuyRite = .0707 MotorCity = .7143 Portfolio Return At the beginning of the month you owned $6500 of Company G $8900 of Company S and $2800 of Company N. The monthly returns for Company G Company S and Company N were 8.15 percent -1.59 percent and -.14 percent. What is your portfolio return? 2.14% 6.42% 3.29% 2.13% The standard deviation of the past five monthly returns for PG Company are 2.75 percent -0.75 percent 4.15 percent 6.29 percent and 3.84 percent. What is the standard deviation? 2.309 percent 2.581 percent 3.256 percent 3.406 percent Rank the following three stocks by their risk-return relationship best to worst. Rail Haul has an average return of 10 percent and standard deviation of 19 percent. The average return and standard deviation of Idol Staff are 12 percent and 22 percent; and of Poker-R-Us are 11 percent and 25 percent. Idol Staff Rail Haul Poker-R-Us Rail Haul Idol Staff Poker-R-Us Idol Staff Poker-R-Us Rail Haul Poker-R-Us Rail Haul Idol Staff Which of the following statements is correct? A single stock has a lot of diversifiable risk. A single stock has more market risk than a diversified portfolio of stocks. Bonds and stocks have a high correlation because they are both financial assets. None of these statements is correct. Which of the following statements is correct with regards to diversification? Diversifying reduces the return of the portfolio. Diversifying reduces the market risk of the portfolio. Diversifying reduces the dollar return of the portfolio. None of these statements is correct. Expected Return Compute the expected return given these three economic states their likelihoods and the potential returns: Economic State Probability Return Fast Growth .1 29% Slow Growth .8 14% Recession .1 -29% 14.0% 14.3% 11.2% 17.0% Risk Premium If the annual return on the S&P 500 Index was 14.00 percent. The annual T-bill yield during the same period was 6.50 percent. What was the market risk premium during that year? 20.50% 14.00% 7.50% 6.50% CAPM Required Return A company has a beta of .69. If the market return is expected to be 13.9 percent and the risk-free rate is 5.95 percent what is the companys required return? 11.44% 15.54% 17.39% 9.59% Portfolio Beta You have a portfolio with a beta of .94. What will be the new portfolio beta if you keep 40 percent of your money in the old portfolio and 60 percent in a stock with a beta of 1.54? 1.24 1.00 1.30 2.48 Under/Over Valued Stock A manager believes his firm will earn a 17.8 percent return next year. His firm has a beta of 1.68 the expected return on the market is 15.8 percent and the risk-free rate is 5.8 percent. Compute the return the firm should earn given its level of risk and determine whether the manager is saying the firm is under-valued or over-valued. 22.6% under-valued 27.544% under-valued 27.544% over-valued 22.6% over-valued Show less
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