FIN 304 Fall 24 - Quiz #5 (11/7)

What is the expected return of Stock A if the probabilities of three economic states are 0.4, 0.3, and 0.3, with respective returns of 10%, 20%, and -5%?

• 7.0%
• 8.5%
• 9.5%
• 10.0%
• 12.5%

If a portfolio consists of $3,000 invested in Stock X with an expected return of 8% and $7,000 in Stock Y with an expected return of 12%, what is the expected return of the portfolio?

• 10.20%
• 10.80%
• 11.00%
• 11.40%
• 9.75%

If Stock C has a beta of 1.5 and the risk-free rate is 3%, with the market risk premium being 7%, what is the expected return of Stock C according to CAPM?

• 13.5%
• 14.5%
• 12.5%
• 11.5%
• 10.5%

What does a beta coefficient of 1.2 indicate about a stock’s risk?

• The stock has less risk than the market
• The stock has the same risk as the market
• The stock has 20% more risk than the market
• The stock has 20% less risk than the market
• The stock's risk is unrelated to the market

Which of the following statements best defines systematic risk?

• Risk associated with a single company or industry
• Risk that affects all companies in the market
• Risk that can be eliminated through diversification
• Risk that arises from unpredictable company-specific events
• Risk that has no effect on a diversified portfolio