13. Asset Y has a beta of 1.5. The risk-free interest rate is 2%, while the mark
ID: 2797928 • Letter: 1
Question
13. Asset Y has a beta of 1.5. The risk-free interest rate is 2%, while the market required return is 12%. Asset Y's premium is A, B. C, D. none of the above: the correct answer is 10% 15% 18% The market price of a preferred stock paying a S requ A. $60 B. $65 C. $75 D. none of the above: the correct answer is re a 5% rate of return, the true value of the preferred stock is e? 15. Which of the following statements about the beta coefficient is not tn A. A beta of > 1 implies that the stock's volatility is greater than that of the market B. A beta of0 implies that the stock tends to move against the r C. A beta of 1 implies a volatility equal to that of the market D. All of the above are true 16. A firm is considering two capital budgeting projects. If it accepts one, that does not eliminate the other from consideration. Such projects are called: A. independent projects B. mutually exclusive projects C. replacement projects D. none of the above: the correct answer is- 17. A firm is considering diversify into another line of business. The opportunities available have about the same expected returns, and the firm is interested in lowering its overall risk. The investments and their correlation coefficients are listed below. Which should the firm choose? A. cooper mines, +0.3 B. machinery construction, +0.5 C. toy manufacturing. +0.7 D. janitorial services,0 risk the number of portfolio components A. market, declines, larger B. nonsystematic, declines, larger C. nonsystematic, rises, larger D. market, declines, smallerExplanation / Answer
13.The correct answer is A.
14.The correct answer is A.
15.The correct answer is B.
16.The correct answer is A
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Risk premium = Market return – Risk free return
= 12 – 2
= 10%
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Price = Annual dividend/interest rate
= 3/0.05
= 60
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Beta can never be Zero.
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Such projects are called independent projects.
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Hope this answer your query.
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