1. You own a portfolio comprised entirely of 100 shares of Stock A and 500 shares of Stock B. The current market prices for Stock A and Stock B are $20 and $7, respectively. Stock A’s expected return is 14%, and Stock B’s expected return is 9%. What is the expected return on the portfolio?
a. 0.1006
b. 0.1050
c. 0.1082
d. 0.1113
e. 0.1141
2. Phil's Carvings, Inc. wants to have a weighted average cost of capital of 9.5 percent. The firm has an aftertax cost of debt of 6.5 percent and a cost of equity of 12.75 percent. What debt-equity ratio is needed for the firm to achieve their targeted weighted average cost of capital?
a. .67
b. .84
c. .92
d. .76
e. 1.08