Investment Risk and Portfolio Management Paper 5

1

An analyst at ABC Securities is in the process of reviewing the following information on YoYo, Inc., a publicly traded toy manufacturer:
? Share price for the last 20 years
? 10-Q filings for the last 5 years
? 10-K filings for the last 15 years
? Website for YoYo, Inc.
The above collection of data is an example of which of the following?






2

The term “beta” can best be described as the






3

The CFO of Clean Waterworks, a publicly traded company, is expecting to pay a dividend next year of $1.25 and projecting that the price of the company’s stock will be $45 in 1 year. The CFO has determined that the required rate of return for Clean Waterworks is 10%. Based on the data available, what is the value of one share of Clean Waterworks stock today?






4

Risk factors that cannot be eliminated through diversification include which of the following?
I. Interest-rate fluctuations
II. General price-level changes
III. New product development
IV. Management turnover






5

Yerxa Industries is considering expanding its international operations. Which one of the following conditions should Yerxa’s controller classify as political risk?






6

In the context of the capital asset pricing model (CAPM), the beta coefficient of a stock that has the same systematic risk as the market as a whole is equal to






7

Systematic risk explains why






8

Stock A and Stock B are combined into an equally weighted portfolio. If Stock A has a standard deviation of return of 30%, Stock B has a standard deviation of return of 30%, and the portfolio of the two stocks has a standard deviation of return of 30%, what is the correlation coefficient of the returns between the two stocks?






9

A stock began the year with a stock price of $60 per share. In the middle of the year, it had a 3-for-2 stock split. The stock ended the year with a price of $50 per share. No dividends were paid. What total return did investors earn on the stock during this year? A. - B. C.






10

An analyst uses the capital asset pricing model (CAPM) to measure the required return on two stocks, X and Y. The expected market rate of return is 12%, the risk-free rate of return is 4%, the beta (?) coefficient of stock X is 0.5, and the beta (?) coefficient of stock Y is 2.0. The required returns of the two stocks are






Result

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