Question 1: Nico bought 100 shares of Cisco Systems stock for $24.00 per share on January 1, 2002. He received a dividend of $2.00 per share at the end of 2002 and $3.00 per share at the end of 2003. At the end of 2004, Nico collected a dividend of $4.00 per share and sold his stock for $18.00 per share. What was Nico's realized return during the three year holding period?
1. -16.7%
2. +16.7%
3. -12.5%
4. +12.5%
Question 2: Nico wants to invest all of his money in just two assets: the risk free asset and the market portfolio. What is Nico's portfolio beta if he invests a quarter of his money in the market portfolio and the rest in the risk free asset?
1. 0.25
2. 0.75
3. 0.00
4. 1.00
Question 3: An investment advisor has recommended a $50,000 portfolio containing assets R, J, and K; $25,000 will be invested in asset R, with an expected annual return of 12 percent; $10,000 will be invested in asset J, with an expected annual return of 18 percent; and $15,000 will be invested in asset K, with an expected annual return of 8 percent. The expected annual return of this portfolio is
1. 10.00%.
2. 12.67%.
3. unable to be determined from the information provided.
4. 12.00%.
Question 4: An investment banker has recommended a $100,000 portfolio containing assets B, D, and F. $20,000 will be invested in asset B, with a beta of 1.5; $50,000 will be invested in asset D, with a beta of 2.0; and $30,000 will be invested in asset F, with a beta of 0.5. The beta of the portfolio is
1. 1.45
2. 1.25
3. 1.33
4. unable to be determined from the information provided.
Question 5: What is the expected risk-free rate of return if asset X, with a beta of 1.5, has an expected return of 20 percent, and the expected market return is 15 percent?
1. 5.0%
2. 7.5%
3. 22.5%
4. 15.0%
Question 6: Nicole holds three stocks in her portfolio: A, B, and C. The portfolio beta is 1.40. Stock A comprises 15 percent of the dollar value of her holdings and has a beta of 1.0. If Nicole sells all of her investment in A and invests the proceeds in the risk-free asset, her new portfolio beta will be:
1. 0.60.
2. 0.88.
3. 1.00.
4. 1.25.
Question 7: Last year Mike bought 100 shares of Dallas Corporation common stock for $53 per share. During the year he received dividends of $1.45 per share. The stock is currently selling for $60 per share. What rate of return did Mike earn over the year?
1. 11.7 percent.
2. 14.1 percent.
3. 15.9 percent.
4. 13.2 percent.