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FIN 301 Study Guide - Quiz Guide: S&P 500 Index, Net Present Value, Capital Asset

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turquoisegnu128
28 Sep 2018
School
PSU
Department
Finance
Course
FIN 301
Professor
All

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Group 1: given the following information, calculate fund abc"s alpha: Ending fund value: : -5, 3, -3, 5, 4% Answer: b: given the following information, calculate fund psu"s alpha: Ending fund value: : -1. 5, 4. 0, -5. 0, 1. 5, 5. 0% Group 2: given the following information, calculate the firm"s beta: Market risk premium: 5: 1. 18, 2. 54, 0. 64, 1. 40, 1. 00. Answer: d: given the following information, calculate the firm"s beta: Market risk premium: 5: 1. 00, 1. 60, 1. 55, 0. 30, 0. 60. An investor will receive a 20-year annuity of ,500 per year. An investor will receive a 15-year annuity of ,000 per year. Homer makes a payment of ,000 a year on his house. At the end of 30 years, he"s paid off his. Marge makes a payment of ,500 a year on her car. At the end of 7 years, she"s paid off her. Your friend wants to borrow ,000 from you and gives you three options for repayment.

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Related Questions

CAPM, portfolio risk, and return

Consider the following information for three stocks, Stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.)

Stock Expected Return Standard Deviation Beta
A 8.92 % 15 % 0.9
B 10.22 15 1.2
C 11.96 15 1.6

Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 5%, and the market is in equilibrium. (That is, required returns equal expected returns.)

A) What is the market risk premium (rM - rRF)? Round your answer to two decimal places.
%

B) What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places.

C) What is the required return of Fund P? Do not round intermediate calculations. Round your answer to two decimal places.
%

D) Would you expect the standard deviation of Fund P to be less than 15%, equal to 15%, or greater than 15%?

a. less than 15%

b. greater than 15%

c. equal to 15%

Which one of these will produce an acceptable estimate of the value of the market risk premium?

A.

Historical rate of return on a market index

B.

Average rate of return on the S&P 500 plus the risk-free rate

C.

Dividend yield of the S&P 500 + Consensus forecast of future dividend growth - U.S. Treasury bill rate

D.

Total dividends paid by the S&P 500 firms for a 1-year period divided by the U.S. Treasury bill rate

E.

Rate computed using the CAPM and a beta of 1

PLEASE ANSWER ALL 6 QUESTIONS BELOW, PARTICULARLY QUESTIONS 5 AND 6. THANKS.

.You have the following information for Dell Inc.: 5%, 15%, -10%, 25%.

1. Calculate the average return and standard deviation for a population for Claymore.

2. The S&P 500 market portfolio has a standard deviation of 20%.Claymore Inc. has a beta of .57.Find the correlation between Claymore and the S&P 500.HINT: The formula for beta can help you get the correlation.

3. The S&P market portfolio has a return of 15%.Ten-year T-bonds (risk-free asset) have a return of 2.5%.Use Claymore’s beta of .57 to estimate the required return for the stock.

4. If you put $120,000 into Claymore and $40,000 into the S&P 500, find the return and standard deviation of your portfolio.

5. You estimate the expected return on Dell’s stock at 16%. If the market is efficient, what will happen to the price of Dell? Explain.

6. Dell announces a new project. The new project has a beta of 1.5 and an expected return (IRR) of 20%. Is the project a good idea? Explain.