Questions from Corporate Finance

Q: Here are the percentage returns on two stocks. a.

Here are the percentage returns on two stocks. a. Calculate the monthly variance and standard deviation of each stock. Which stock is the riskier if held on its own? b. Now calculate the variance and...

Q: True or false? a. Investors prefer diversified companies because

True or false? a. Investors prefer diversified companies because they are less risky. b. If stocks were perfectly positively correlated, diversification would not reduce risk. c. Diversification over...

Q: Portfolio risk Suppose that the standard deviation of returns from a typical

Portfolio risk Suppose that the standard deviation of returns from a typical share is about .40 (or 40%) a year. The correlation between the returns of each pair of shares is about .3. a. Calculate th...

Q: What is the beta of each of the stocks shown in Table

What is the beta of each of the stocks shown in Table 7.9?

Q: For each of the following pairs of investments, state which would

For each of the following pairs of investments, state which would always be preferred by a rational investor (assuming that these are the only investments available to the investor): a. Portfolio A, r...

Q: Look back at Problem 9 in Chapter 7. The risk-

Look back at Problem 9 in Chapter 7. The risk-free interest rate in each of these years was as follows: a. Calculate the average return and standard deviation of returns for Ms. Saurosâ€
...

Q: Portfolio beta Refer to Table 7.5. a.

Portfolio beta Refer to Table 7.5. a. What is the beta of a portfolio that has 40% invested in ExxonMobil and 60% in Newmont? b. Would you invest in this portfolio if you had no superior information a...

Q: True or false? Explain or qualify as necessary. a

True or false? Explain or qualify as necessary. a. Investors demand higher expected rates of return on stocks with more variable rates of return. b. The CAPM predicts that a security with a beta of 0...

Q: True or false? a. The CAPM implies that if

True or false? a. The CAPM implies that if you could find an investment with a negative beta, its expected return would be less than the interest rate. b. The expected return on an investment with a b...

Q: Suppose that the Treasury bill rate is 6% rather than 2

Suppose that the Treasury bill rate is 6% rather than 2%. Assume that the expected return on the market stays at 9%. Use the betas in Table 8.2. a. Calculate the expected return from Johnson & Johnson...