problem 1: Tom Skinner consists of $45,000 invested in a stock with a beta of 0.8 and the other $55,000 invested in a stock with a beta of 1.4. These are just two investments in his portfolio. Determine his portfolio's beta?
a) 0.93
b) 0.98
c) 1.03
d) 1.08
e) 1.13
problem 2: Magee Company's stock consists of a beta of 1.20, the risk-free rate is 4.50% and the market risk premium is 5.00%. Determine the Magee's required return?
a) 10.25%
b) 10.50%
c) 10.75%
d) 11.00%
e) 11.25%
problem 3: Niendorf Corporation's stock consists of a required return of 13.00%; the risk-free rate is 7.00%, and the market risk premium is 4.00%. Now assume there is a shift in investor risk aversion and the market risk premium rises by 2.00%. What is Niendorf's new required return?
a) 14.00%
b) 15.00%
c) 16.00%
d) 17.00%
e) 18.00%
problem 4: Apex Roofing's stock consists of a beta of 1.50, its required return is 14.00% and the risk-free rate is 5.00%. Determine the required rate of return on the stock market?
a) 10.50%
b) 11.00%
c) 11.50%
d) 12.00%
e) 12.50%
problem 5: Assume that you hold a diversified portfolio comprising of $10,000 invested equally in each of 10 different common stocks. The portfolio's beta is 1.120. Now assume that you decided to sell one of your stocks that consist of a beta of 1.000 and to use the proceeds to purchase a replacement stock with a beta of 1.750. Determine the portfolio's new beta?
a) 0.982
b) 1.017
c) 1.195
d) 1.246
e) 1.519