Question Details

1.
Magee Company's stock has a beta of 1.20, the risk-free rate is 4.50%, and the market risk premium is 5.00%.  What is Magee's required return?
(Points : 4) 
      10.25%
      10.50%
      10.75%
      11.00%
      11.25%

2.
Parr Paper's stock has a beta of 1.40, and its required return is 13.00%.  Clover Dairy's stock has a beta of 0.80.  If the risk-free rate is 4.00%, what is the required rate of return on Clover's stock?  (Hint: First find the market risk premium.)
(Points : 4) 
      8.55%
      8.71%
      8.99%
      9.14%
      9.33%

3.
Suppose you hold a diversified portfolio consisting of $10,000 invested equally in each of 10 different common stocks.  The portfolio- beta is 1.120.  Now suppose you decided to sell one of your stocks that has a beta of 1.000 and to use the proceeds to buy a replacement stock with a beta of 1.750.  What would the portfolio- new beta be?
(Points : 4) 
      0.982
      1.017
      1.195
      1.246
      1.519

4. A mutual fund manager has a $20.0 million portfolio with a beta of 1.50. The risk-free rate is 4.50%, and the market risk premium is 5.50%.  The manager expects to receive an additional $5.0 million which she plans to invest in a number of stocks.  After investing the additional funds, she wants the fund- required return to be 13.00%.  What must the average beta of the new stocks added to the portfolio be to achieve the desired required rate of return? (Points : 4) 
      1.12
      1.26
      1.37
      1.59
      1.73

5.
A stock is expected to pay a dividend of $1 at the end of the year.  The required rate of return is rs = 11%, and the expected constant growth rate is 5%.  What is the current stock price?
(Points : 4) 
      $16.67 
      $18.83 
      $20.00 
      $21.67 
      $23.33 

6.
 A stock just paid a dividend of $1.  The required rate of return is rs = 11%, and the constant growth rate is 5%.  What is the current stock price?
(Points : 4) 
      $15.00 
      $17.50 
      $20.00 
      $22.50 
      $25.00 

7.
The Lashgari Company is expected to pay a dividend of $1 per share at the end of the year, and that dividend is expected to grow at a constant rate of 5% per year in the future.  The company's beta is 1.2, the market risk premium is 5%, and the risk-free rate is 3%.  What is the company's current stock price?
(Points : 4) 
      $15.00 
      $20.00 
      $25.00 
      $30.00 
      $35.00 

8.
An increase in a firm- expected growth rate would normally cause its required rate of return to
(Points : 4) 
      Increase. 
      Decrease. 
      Fluctuate. 
      Remain constant.
      Possibly increase, decrease, or have no effect. 

9.
If a company's dividend is $2.12 and the price of the company's stock is $40 what is the stock's dividend yield?
(Points : 4) 
      5.0%
      5.1%
      5.3%
      5.6%
      5.8%

10.
A share of common stock has just paid a dividend of $2.00.  If the expected long-run growth rate for this stock is 7%, and if investors require a(n) 11% rate of return, what is the price of the stock?
(Points : 4) 
      $47.50
      $49.00
      $50.50
      $52.00
      $53.50
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