1. Dothan Inc.\'s stock has a 25% chance of producing a 17% return, a 50% chance
ID: 2646983 • Letter: 1
Question
1. Dothan Inc.'s stock has a 25% chance of producing a 17% return, a 50% chance of producing a 12% return, and a 25% chance of producing a -18% return. What is the firm's expected rate of return?
5.81%
5.75%
6.27%
4.43%
Stock
Investment
Beta
A
$50,000
0.80
B
$50,000
0.80
C
$50,000
1.00
D
$50,000
1.20
Total
$200,000
0.817
1.083
0.798
0.732
0.950
5.81%
5.75%
6.27%
4.43%
4.72%2. Jim Angel holds a $200,000 portfolio consisting of the following stocks:
Stock
Investment
Beta
A
$50,000
0.80
B
$50,000
0.80
C
$50,000
1.00
D
$50,000
1.20
Total
$200,000
What is the portfolio's beta?
0.817
1.083
0.798
0.732
0.950
Explanation / Answer
true answer is 1)B 2)D
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