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FIN 515 Managerial Finance Week 5 Risk, Return, and the Capital Asset Pricing Model Quiz Answer

FIN 515 Managerial Finance Week 5 Risk, Return, and the Capital Asset Pricing Model Quiz Answer

FIN 515 Managerial Finance Week 5 Risk, Return, and the Capital Asset Pricing Model Quiz Answer

Week 5 : Risk, Return, and the Capital Asset Pricing Model – Quiz

Question 1. 1. (TCO C) Company A has a beta of 2.77. Company B has a beta of .73. Company C has a beta of .90. The risk free rate is 6% and the market risk premium is 4%. What is the expected return of investing in Company B? Show your work. (Points : 5)

Question 2. 2. (TCO C) Your stock portfolio consists of only two stocks. You have $30,000 in Company A and $35,000 in Company B. Company A has an actual return of -8% and Company B has a return of 12%. What is the return on your portfolio? Show your work. (Points : 5)

Question 3. 3. (TCO E) A company has a capital structure of 40% debt and 60% equity. The YTM on the company’s bonds is 9%, and the company’s effective tax rate is 40%. The CFO has estimated the company’s WACC to be 9.96%. What is the company’s cost of equity? Show your work. (Points : 10)

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FIN 515 Week 5 Quiz

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