Exam 3: Risk and Return

If two variables are perfectly positively correlated, it means:

Beta is best described as a measure of:

Your purchased a stock on June 1 for $112.00 per share and promptly sold it on September 1 for $115.36 per share. Calculated the holding period return and the annualized return on the stock.

In years 1-5, Stock A had returns of 5.6%, 7.9%, 4.2%, 1.8% and 4.5% respectively. During that same period of time the stock market had returns of 6.2%, 7.3%, 5.8%, 4.5% and 6.1% respectively. Use these data and Excel's COVARIANCE.P and VAR.P functions to calculate Stock A's beta over this five-year period.

Farquar Manufacturing has a required return of 9.50%. If the market return is 13.0% and the nominal risk-free rate is 6.0%, what is Farquar's beta?

You purchased a stock for $50.00 share at the end of 2014. At the end of the years 2015-2018, the stock was worth $54.75, $59.13, $56.41 and $60.06 respectively. You sold the stock at the end of 2019 for $62.00 per share. Calculate your arithmetic and geometric mean returns for the stock during the period in which you owned it.

You are a financial analyst, and you are tasked with calculating the expected return and standard deviation of returns for Kershaw Enterprises. Toward that end, you are given the following data: $\bullet$ In an expanding economy, Kershaw is expected to earn 5.30%; $\bullet$ In a booming economy, Kershaw is expected to earn 9.50%; $\bullet$ In a contracting economy, Kershaw is expected to earn 3.50%; $\bullet$ In a recession, Kershaw is expected to earn ?1.20%; $\bullet$ The probabilities for expansion, boom, contraction and recession are 20%, 25%, 35% and 20% respectively.

You purchased 500 shares of Malfoy Manufacturing's common stock for $35.00 per share, and you sold it again one year later for $39.90 per share. During the year that you held the stock, you were paid a dividend of $2.03 per share. Calculate the dividend yield, capital gains yield and total yield for your investment.

In terms of risk, labor union disputes, entry of a new competitor and embezzlement by management are all examples of factors affecting:

A good measure of an investor's risk exposure if she/he only holds a single asset in her portfolio is:

The standard deviation is a:

Stock A's returns have a standard deviation of 7.0%, while Stock B's returns have a standard deviation of 9.0%. The correlation coefficient between stocks A and B is 0.45. Use these data to calculate the standard deviation of a portfolio that contains 40% Stock A and 60% Stock B

You purchased 25 corporate bonds for $985.00 each and held them for one year, at which point you sold the bonds for $965.30 each. During the year, you received interest payments of $79.80 per bond. Calculate the current yield, capital gains yield and total yield on the bonds for the year during which you owned them.

You are given the following probability distribution of returns for a stock. Use the data to calculate the expected return, standard deviation of returns and coefficient of variation of returns for the stock. Return Probability 8.0\% 0.20 10.0\% 0.10 12.0\% 0.40 15.0\% 0.20 16.0\% 0.10

The beta for Beltrand Industries is 1.50. Assuming that the nominal risk-free rate is 6.0% and that the return to the market is 9.0%, what is Beltrand's required return?

You are considering investing in Digital Consolidated's common stock. Based on your perception of Digital's riskiness, you will require a return of 8.5% on their stock. Digital's most recent beta is 1.20. The risk-free rate is currently 3.25%, while the market return is currently 7.75%. Based on these data, should you invest in Digital's stock?

Currently XYZ Company has a required return of 12% and a beta of 1.2. According to the CAPM, XYZ:

When we compare the risk of two investments that have the same expected return, the coefficient of variation: