1. Stock X produced the following returns in recent years:

Year Stock X

1 9%

2 9%

3 7%

4 -8%

5 6%

Calculate the standard deviations of the returns on the stock.

2. Calculate the expected return on stock of Time Saver Inc.:

State of the economy Probability of the states Percentage returns

Economic recession 23% 6.2%

Steady economic growth 37% 3.6%

Boom Please calculate it -3.7%

Round the answers to two decimal places in percentage form.

3. King Farm Manufacturing Company’s common stock has a beta of 1.57. If the risk-free rate is 3.52 percent, and the market return is 9.90 percent, calculate the required return on King Farm Manufacturing’s common stock.

4. Which of the following statements is false?

Question options:

A) A stock is overvalued if its estimated rate of return is less than its required rate of return.

B) A stock is undervalued if its estimated rate of return is above its required rate of return.

C) A stock is considered overvalued if its required rate of return is below its estimated rate of return.

D) A stock is properly valued if its estimated rate of return is equal to its required rate of return.