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.