What is the profit on the following investment? Investment Original Cost or Invested $ Selling Price of Investment Distributions Received $ Dollar Profits Stock $34.00 $26.00 $2.00 Question 1 options: -2 -10 -4 -6 -8 What is the profit on the following investment? Investment Original Cost or Invested $ Selling Price of Investment Distributions Received $ Dollar Profits Bond $955.00 $1000.00 $240.00 Question 2 options: 45 90 285 150 75 What is the return on the following investment? Investment Original Cost or Invested $ Selling Price of Investment Distributions Received $ Percent Return Stock $34.00 $26.00 $2.00 Question 3 options: -14.5% -17.65% -16.11% -21.23% -19.35 What is the return on the following investment? Investment Original Cost or Invested $ Selling Price of Investment Distributions Received $ Percent Return Bond $955.00 $1000.00 $240.00 Question 4 options: 34.07% 26.99% 29.21% 29.84% 32.88% Bohenick Classic Automobiles restores and rebuilds old classic cars. The company purchased and restored a classic 1957 Thunderbird convertible six years ago for $8,500. Today at auction, the car sold for $50,000. What is the holding period return? Question 5 options: 479.01% 501.69% 524.21% 488.24% 505.13% What is the annual compounded return on this investment? Question 6 options: 34.36% 36.42% 37.78% 33.06% 32.18% WG Investors are looking at three different investment opportunities. Investment one is a five-year investment with a cost of $125 and a promised payout of $250 at maturity. Investment two is a seven-year investment with a cost of $125 and a promised payout of $350. Investment three is a ten-year investment with a cost of $125 and a promised payout of $550. WG Investors can only take on one of the three investments. What is the highest annual compounded return? Question 7 options: 15.73% 15.35% 16.96% 15.97% 17.12% Use this table for the next 5 questions: Bacon and Associates, a famous Northwest think tank, has provided probability estimates for the four potential economic states for the coming year. The probability of a boom economy is 20%, the probability of a stable growth economy is 45%, the probability of a stagnant economy is 20%, and the probability of a recession is 15%. INVESTMENT Forecasted Returns for Each Economy Boom Stable Growth Stagnant Recession Stock 25% 12% 4% 12% Corporate Bond 9% 7% 5% 3% Government Bond 8% 6% 4% 2% Estimate the expected return on the stock. Question 8 options: 10.66 8.57 9.40 9.08 8.18 Estimate the expected return on the corporate bond. Question 9 options: 5.90 6.4% 5.97 6.99 6.52 Estimate the expected return on the government bond. Question 10 options: 6.0% 5.2% 5.6% 5.4% 5.8% Using the table from the previous problem, calculate the variance of the stock. Question 11 options: .0126 .0178 .0145 .0122 .0134 Using the table from the previous problem, calculate the standard deviation of the corporate bond. Question 12 options: .0734 .0543 .0277 .0191 .0345 Use the following information to answer the next 6 questions. State of Economy Probability of State Return on D in State Return on E in State Return on F in State Boom 0.35 0.060 0.310 0.150 Normal 0.50 0.060 0.180 0.120 Recession 0.15 0.060 0.210 0.060 What is the expected return for Asset E? Question 13 options: 17.50% 16.44% 16.70% 16.50% 16.80% What is the variance for Asset E? Question 14 options: 0.027514 0.028561 0.030415 0.025194 0.023382 What is the standard deviation for asset E? Question 15 options: .089 .154 .172 .169 .123 What is the expected return for Asset F? Question 16 options: 10.35% 10.88% 10.75% 10.55% 11.25% What is the variance for Asset F? Question 17 options: 0.004903 0.002905 0.00313 0.00653 0.00124 What is the standard deviation for asset F? Question 18 options: .08 .10 .05 .06 .07 The beta of four stocksP, Q, R, and Sare respectively 0.6, 0.85, 1.2, and 1.35. Weight in P Weight in Q Weight in R Weight in S Portfolio 1 25% 25% 25% 25% Portfolio 2 30% 40% 20% 10% Portfolio 3 10% 20% 40% 30% What is the beta of portfolio 1? Question 19 options: 1.4 1.2 1.5 1.0 .8 What is the beta of portfolio 2? Question 20 options: .895 .903 .957 1.23 1.02 What is the beta of portfolio 3? Question 21 options: 1.054 1.073 1.216 1.102 1.115 What is the expected return of portfolio 1 if the current SML is plotted with an intercept of 3% (risk-free rate) and a market premium of 11% (slope of the line)? Question 22 options: 16% 18% 15% 17% 14% What is the expected return of portfolio 2 if the current SML is plotted with an intercept of 3% (risk-free rate) and a market premium of 11% (slope of the line)? Question 23 options: 12.845% 11.235% 13.255% 14.566% 10.755% What is the expected return of portfolio 3 if the current SML is plotted with an intercept of 3% (risk-free rate) and a market premium of 11% (slope of the line)? Question 24 options: 17.295% 15.265% 14.365% 14.455% 15.805% Ms. Chambers wants to change the expected return of her portfolio. Currently, she has all her money in U.S. Treasury Bills with a return of 3%. She can switch some of her money into a risky portfolio with an expected return of 15%. What percentage of her wealth will she need to invest in the risky portfolio to get an expected return of 5%? Question 25 options: 1/2 1/6 1/5 1/8 1/3 Ms. Chambers wants to change the expected return of her portfolio. Currently, she has all her money in U.S. Treasury Bills with a return of 3%. She can switch some of her money into a risky portfolio with an expected return of 15%. What percentage of her wealth will she need to invest in the risky portfolio to get an expected return of 7%? Question 26 options: 1/3 1/2 1/5 1/8 1/6 The Uptown Investment Club has $50,000 to invest in the equity market. Chandler advocates investing the funds in Monica’s Restaurant with a beta of 1.8 and an expected return of 22%. Ross advocates investing the funds in Rachel’s Clothing Store with a beta of 0.9 and an expected return of 11%. The club is split 50/50 on the two stocks. You are the deciding vote, and you cannot pick a split of $25,000 for each stock. The current risk-free rate is 2.45%. What is the highest reward-to-risk ratio of the 2 stocks? (Hint: use the formula: risk-to-reward = (expected return – risk-free rate) / beta. Question 27 options: 10.86% 12.55% 10.34% 11.47% 9.76% Two risky portfolios exist for investing: one is a bond portfolio with a beta of 0.7 and an expected return of 9%, and another is an equity portfolio with a beta of 1.5 and an expected return of 17%. If these portfolios are the only two available assets for investing, what percentage should Jerry invest in bonds if his desired expected return is 16%? Question 28 options: 11.22% 12.5% 13.14% 12.04% 13.98% What is the beta of Jerry’s bond and equity portfolio? (Hint: you found the percentage of money in the bond portfolio in the previous question. Find the percentage in the stock portfolio and the use the betas from the pervious question to find the answer). Question 29 options: 1.3 1.5 1.2 1.8 1.4 Two risky portfolios exist for investing: one is a bond portfolio with a beta of 0.7 and an expected return of 9%, and another is an equity portfolio with a beta of 1.5 and an expected return of 17%. If these portfolios are the only two available assets for investing, what percentage should be invested in bonds if Elaine’s desired expected return is 13%? Question 30 options: 5/6 3/4 1/2 1/3 1/6 What is the beta of Elaine’s bond and equity portfolio? (Hint: you found the percentage of money in the bond portfolio in the previous question. Find the percentage in the stock portfolio and the use the betas from the pervious question to find the answer). Question 31 options: 1.3 1.7 .9 1.5 1.1
