You hold the following two stocks:  40% invested in Stock A and 60% invested in Stock B.   Company Beta Stock A 1.2 Stock B 0.8 What is the portfolio Beta? Round to two decimal places.

The Fish House increases its dividend each year.  The next annual dividend is expected to be $2.21 a share.  Future dividends will increase by 3.5% annually.  What is the current value of this stock if the discount rate is 12%? Round to the nearest cent.

What are the key assumptions of the Gordon Growth Model? Select all that apply.

The stock of ABC, Inc. has a beta of 0.94.  The market risk premium is 7.1%, and the expected market return is 10.3%.  What is the expected return on ABC, Inc.’s stock? Express as a percentage and round to two decimal places.  Report your answer in decimal form and round to at least 4 decimals.

Consider the following 3-State Economy.  What is the expected return for the stock in this example?   Report your answer in decimal form and round to at least 4 decimals. State of Economy Probability Expected Return Boom 0.05 16% Normal 0.45 7% Recession ? -12%

Consider a world with two possible future states and only two assets: stocks and bonds.  The world is described in the table below. State Probability Return (stocks) Return (bonds) Booming Economy 30% 22% -2% Recession 70% -6% 6% What is the expected return on stocks? Report your answer in decimal form and round to at least 4 decimals.

A company has a beta of 1.0, pays a constant dividend of $3.50 per year, and is expected to continue doing so indefinitely.  The current market return is 9%.  What is the intrinsic value of the company stock?  Round to the nearest cent.

Suppose you live in a world in which the risk-free rate is 2%.  In this world, the portfolio with the maximum Sharpe Ratio has an expected return of 9.2% and a standard deviation of 12.5%.  An investor wants to create a portfolio in this world that pays exactly a 6% return.  What weight will the investor allocate to the optimal portfolio?  Report your answer in decimal form and round to at least 4 decimals.

Stock D has a standard deviation of 45% per year, and Stock E has a standard deviation of 60% per year.  The correlation between stock D and stock E is 0.40.  What is the covariance?  Round your answer to 4 decimal places.

You are evaluating the following portfolios, along with their expected returns and standard deviations.  Assume the risk-free rate is 3%.   Portfolio Expected Return Standard Deviation A 7% 6% B 9% 8% C 12% 10% D 14% 14% E 10% 12% Which portfolio has the highest Sharpe ratio?