nsu fin5130 module 3 discussion latest 2017 october

Module 3 discussion Problem set 1 One year ago you bought a stock for $36.48 a share. You recently received a dividend of $1.62 per share and sold the stock today for $40.18 a share. What is the dollar return and percentage return on this investment?One year ago you bought 480 shares of ABC Company for $28.32 a share. You recently received a dividend of $0.75 per share and sold the stock today for $35 a share. What is the dollar return and percentage return on this investment?Problem set 2Over the past five years a stock provided annual returns of 12.6 percent 5.8 percent 7.9 percent 11.2 percent and -2.4 percent. What is the arithmetic average return? What is the variance of these returns? What is the standard deviation of these returns?A company had returns of 5% 10% -15% 20% -12% 22% 8% in the last few years. Compute the arithmetic average return and standard deviation of returns.Refer to Problem 2. If inflation rate is 2.5% and the risk-free rate is 3% solve for the real rate and the risk premium. Note: Use arithmetic average return as nominal rateProblem set 3 Suppose the nominal rate is 15% the real rate is 10.5% what is the inflation rate?If the investors require a 10% real rate of return and the inflation rate is 8% what is the nominal rate?The nominal rate is 15.5% and the inflation rate is 5% what is the real rate?Problem set 4 Assume that your portfolio comprises of Stocks A B and C. Based on the following information calculate the portfolio expected return and portfolio beta:Security Value Return BetaStock A $10 000 10% 1.1Stock B $20 000 5% 0.2Stock C $30 000 15% 2.1Problem set 5 A stock has a beta of 0.90 the expected return on the market is 13% and the risk-free rate is 6%. What must the expected return on this stock be?A stock has an expected return of 17% the risk-free rate is 5.5% and the market risk premium is 8%. What must the beta of this stock be?You own a portfolio that has $1 200 invested in Stock A and $1 900 invested in Stock B. If the expected returns on these stocks are 11% and 16% respectively what is the expected return on the portfolio?Problem set 6 There are 3 stocks in a portfolio: Stock A Stock B and Stock C. The portfolio has a return of 3.3%. You are given below the weight of each stock in the portfolio and rate of return. What is the return of Stock C?Stock Weight Rate of ReturnA 35% -4%B 60% 7%C 5% ?Problem set 7 You are given the information for the following securitiesSecurity Weight BetaDCLK .133 4.03KO .2 0.84INTC .267 1.05KEI .4 0.59What is the portfolio beta?Which security has the highest systematic risk?Which security has the lowest systematic risk? Is the systematic risk of the portfolio more or less than the market?Problem set 8 Assume Risk–free rate = 3% Expected return on the market = 8%. Calculate the expected return on the stock if the beta is00.512Interpret your answersProblem set 9 A $100 000 portfolio is invested in a risk-free security and two stocks. The beta of stock A is 1.80 while the beta of stock B is 0.20. One-half of the portfolio is invested in the risk-free security. How much is invested in stock A if the beta of the portfolio is 0.75?Problem set 10 Suppose you hold a diversified portfolio consisting of $7 500 investment in each of 20 different common stocks. The portfolio’s beta is 1.12. Now suppose you sell one of the stocks with a beta of 1.0 for $7 500 and use the proceeds to buy another stock whose beta is 1.75. Calculate your portfolio’s new beta.You have a $2 million portfolio consisting of a $100 000 investment in each of 20 different stocks. The portfolio has a beta of 1.1. You are considering selling $100 000 worth of one stock with a beta od 0.90 and using the proceeds to purchase another stock with a beta of 1.40. What will the portfolio’s new beta be after these transactions?Problem set 11You want to create a portfolio equally as risky as the market. Given this information fill in the rest of the following table:Asset Investment BetaStock A 20% 0.8Stock B 25% 1.3Stock C ? 1.5Risk-free Asset ? ?Hint: Some questions to answer before you start solving the above table:What is the beta of the market portfolio? risk-free asset?What should the weights of individual securities in a portfolio sum to?Problem set 12 The Treasury Bill rate is 4% and the expected return on the market portfolio is 12%. What is the risk premium on the market?What is the required return on an investment with beta of 1.5?If the market expects a return of 11.2% from Stock X what is its beta?Problem set 13A stock has a beta of 1.2 and an expected return of 16%. A risk-free asset currently earns 5%.What is the beta of the risk-free asset?What is the expected return on the portfolio that is equally invested in the two assets (i.e. stock and risk-free asset)?If a portfolio of the two assets has a beta of 0.75 what are the portfolio weights?If a portfolio of the two assets has an expected return of 8% what is its beta?If the security prices reflect only past prices and trading volume information then the market is (choose one from below):weak-form efficientsemi-strong form efficientstrong-form efficientWhat is the difference between intrinsic value and market value of the asset? The instrinsic value of an undervalued asset is likely _________ than the asset’s market value.