Question Details

Roenfeld Corp believes the following probability distribution 


1.	You observe the following information regarding Companies X and Y:

•	Company X has a higher expected return than Company Y.
•	Company X has a lower standard deviation of returns than Company Y.
•	Company X has a higher beta than Company Y.

Given this information, which of the following statements is CORRECT?

a.	Company X has more diversifiable risk than Company Y.
b.	Company X has a lower coefficient of variation than Company Y.
c.	Company X has less market risk than Company Y.
d.	Company X's returns will be negative when Y's returns are positive.
e.	Company X's stock is a better buy than Company Y's stock.
	
2.	Roenfeld Corp believes the following probability distribution exists for its stock.  What is the coefficient of variation on the company's stock?

		Probability	Stock's
	State of	of State	Expected
	the Economy	Occurring		Return	
	Boom	0.45	25%
	Normal	0.50	15%
	Recession	0.05	5%

a.	0.2839
b.	0.3069
c.	0.3299
d.	0.3547
e.	0.3813
	


3.	Jim Angel holds a $200,000 portfolio consisting of the following stocks:

	Stock	Investment	Beta
	A	$ 50,000	0.95
	B	50,000	0.80
	C	50,000	1.00
	D	  50,000	1.20
	Total	$200,000

What is the portfolio's beta?

a.	0.938
b.	0.988
c.	1.037
d.	1.089
e.	1.143
	
4.	Jill Angel holds a $200,000 portfolio consisting of the following stocks.  The portfolio's beta is 0.875.

	Stock	Investment	Beta
	A	$ 50,000	0.50
	B	50,000	0.80
	C	50,000	1.00
	D	  50,000	1.20
	Total	$200,000

If Jill replaces Stock A with another stock, E, which has a beta of 1.50, what will the portfolio's new beta be?

a.	1.07
b.	1.13
c.	1.18
d.	1.24
e.	1.30
	
5.	Mike Flannery holds the following portfolio:

	Stock	Investment	Beta
	A	$150,000	1.40
	B	50,000	0.80
	C	100,000	1.00
	D	  75,000	1.20
	Total	$375,000

What is the portfolio's beta?

a.	1.06
b.	1.17
c.	1.29
d.	1.42
e.	1.56



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