1- Your portfolio has a beta of 1.26. The portfolio consists of 17 percent U.S. Treasury bills, 28 percent stock A, and 55 percent stock B. Stock A has a risk level equivalent to that of the overall market. What is the beta of stock B?

A. 1.10

B. 1.78

C. 1.38

D. 1.32

2- which one of the following stocks is correctly priced if the risk-free rate of return is 2.6 percent and the market risk premium is 7.50 percent?

Stock Beta Expected Return

A 0.72 8.63%

B 1.50 13.80%

C 1.39 13.03%

D 1.05 10.70%

stock A

stock B

stock C

stock D

3- Sou Corp. issued a 20-year, 10 percent semi-annual bond 2 years ago. the bond currently sells for 93 percent of its face value ($1000). the company's tax rate is 25 percent. what is your best estimate of the after-tax cost of debt?

A. 7.08%

B. 6.13%

C. 5.95%

D. 8.09%

4- Southern Home cookin just paid it's annual dividend of $.65 a share. The stock has a market price of $26 and a beta of 1. The return on the U.S. treasury bill is 4% and the market risk premium is 12%. what is the cost of equity?

A. 12.04%

B. 19.60%

C.13.47%

D. 16%