Question1: Which of the following statements is true?
[A] When investors' required rate of return is less than the bond's coupon rate, then market value of the bond will be greater than par value.
[B] When investors' required rate of return is less than the bond's coupon rate, then the market value of the bond will be less than par value.
[C] When investors' required rate of return equals the bond's coupon rate, then the market value of the bond may be selling at par value.
[D] When investors' required rate of return exceeds the bond's coupon rate, then the market value of the bond will be greater than par value.
Question2: A stock with a beta greater than one has returns that are ___________ volatile than the market and a stock with a beta of less than one exhibits returns which are __________ volatile than those of the market portfolio.
[A] less, more
[B] less, less
[C] more, more
[D] more, less
Question3: You hold a portfolio with the following securities:
Percent (%)
Security of Portfolio Beta Return
A Corporation 20% 1.35 14%
B Corporation 35% 0.95 10%
C Corporation 45% 0.75 8%
Calculate the expected return and beta for the portfolio.
[A] 34.40%, 0.94
[B] 9.90%, 0.94
[C] 10.67%, 1.02
[D] 9.90%, 1.02