Question 1: Ahmed purchased a stock for $45 one year ago. The stock is now worth $65. During the year, the stock paid a dividend of $2.50. What is the total return to Ahmed from owning the stock?
a. 5%
b. 44%
c. 35%
d. 50%
Question 2: If you were to compare the returns of an individual stock to a market index, select the answer below that is most true.
a. The returns of the individual stock will show more variability than those of the market index.
b. The returns of the individual stock will show less variability than those of the market index.
c. The returns of the individual stock will show the same level of variability than those of the market index, if they have the same beta.
d. None of the above.
Question 3: You have invested 40 percent of your portfolio in an investment with an expected return of 12 percent and 60 percent of your portfolio in an investment with an expected return of 20 percent. What is the expected return of your portfolio?
a. 15.2%
b. 16.0%
c. 16.8%
d. 17.6%
Question 4: The expected return for Stock P is 30 percent. If we know the following information about Stock P, then what return will it produce in the OK state of the world?
Return Probability
Not So Good 0.2 0.25
Ok ? 0.5
Dynamite! 0.4 0.25
A. .3
B. .2
C. .4
D. It is impossible to determine
Question 5: The risk-free rate of return is currently 3 percent, whereas the market risk premium is 6 percent. If the expected return on Briar Tek's stock is 13.80% , then what is Briar Tek's Beta?
a. 1.7
b. 1.9
c. 1.8
d. 1.2