1. Consider the following information:
Portfolio Expected Return Standard Deviation
Risk-free 7% 0%
Market 11.0 25
Medallion 10.0 14
Calculate the Sharpe ratio for portfolio Medallion.
2. You have a coupon bond paying semiannual interest.
The asking price is 117% of the par value ($1000). The last interest payment was made 30 days ago, and the coupon rate is 6.00%, what is the price of the bond?
A. $1174.95
B. $1180.93
C. $1219.65
D. $1204.52
3. A bond with a 20-year maturity bond and a $1,000 par value makes semiannual coupon payments.
The coupon rate is 8.00%.
The price of the bond is 950$.
What is the bond equivalent yield to maturity?
4. You purchase a call option for $6.10.
The exercise price of that call option = $56.00.
At what price will you break even on the call option purchase?
A. $60.10
B. $62.10
C. $49.90
D. $51.30
5. A stock, JJYT, pays currently pays an annual dividend of $1.00 and is expected to grow at 20.00% for two years.
After the first two years it will grow at 4.00% indefinitely.
The required return for JJYT is 8.50%.
Calculate the intrinsic value of the stock.
6. GYT Inc. pays a dividend of $1.22/year.
It will grow indefinitely at 5.00%.
Based on the constant dividend discount growth model; $32.03 is the current value of GYT Inc shares. Calculate the required rate of return.
7. A ZCB (zero-coupon bond) has a $1,000 face value and a maturity period of five years. It currently sells for $746.22. What is its yield to maturity?
A. 6.28%
B. 6.49%
C. 7.01%
D. 6.03%
8. Consider the following table given some information about different scenarios; the return on two stocks for two particular market returns:
Market Return JH Stock TYIU Stock
8 % 3.8 % 5.0 %
20 32 15
What is the expected rate of return on TYIU stock if the either market return scenario is equally likely?
9. There is an 8-year bond which has a yield of 9.00%.
The duration of the bond is 7.2 years.
The bond’s yield increases by 40 basis points.
What is the percentage change in the bond’s price?
A. -2.90%
B. -2.64%
C. -1.65%
D. -2.01%
10. The standard deviation on the returns of stock GGHY is 28.00%,
The standard deviation of return on stock VBHJ is 23.00%.
The correlation coefficient between the two stocks is -.248.
Using this information; the covariance of returns on GGHY and VBHJ is:
11. Next year, TKKP will earn $6.00 per share.
ROE or the return on equity = 15.00%.
TKKP plowback rate = 60.00% and the firm’s market cap rate = 10.00%.
Use the constant dividend growth model and calculate the price per share
of TKKP.
A. $336.00
B. $310.00
C. $240.00
D. $191.00
The contains data on market advances and declines (number of stocks that have gone up in price and number that have gone down in price).
Market Advances and Declines
Day Advances Declines
(in millions) (in millions)
1. 918 704
2. 701 1,013
3. 727 801
4. 509 980
5. 509 1,098
6. 973 708
7. 1,017 622
8. 915 731
9. 862 752
10. 778 778
Calculate the cumulative breadth of the market at day 7.
A. 591
B. 580
C. 572
D. 513
13. Using the CAPM apparatus and the given information regarding a stock:
The expected return on the market is 13.00%.
The expected return on a stock is 16.00%.
Beta=1.5
What is the risk-free rate?
14. A stock has an expected return of 5.00%.
What is its beta?
Assume the risk-free rate is 7.00%.
The expected rate of return on the market is 15%.
15. AAPX has a current market value of $41.00/share.
Earnings are $3.64/share, and the required rate of return is 9.00%.
Calculate the Present value of Growth opportunities (PVGO).
16. Using the CAPM apparatus and the given information regarding a stock:
The risk-free rate is 8.00%
The expected return on the market is 18.00%.
Beta=1.7
Calculate the stock’s expected return.
17. VHHY will pay an annual dividend of $4.00.
After the first year, the dividends will continue to increase at a constant rate of 4.00%.
The risk-free rate=4.00%.
Expected return on the market portfolio=12.00%.
VHHY beta=0.75.
What is the market capitalization rate?
A. 10.00%
B. 9.50%
C. 8.13%
D. 14.90%
18. You are analyzing three bonds: A, B, and C.
Bond A is callable at $105. Bond B is callable at $110. Bond C is callable at $115.
Which bond values the call provision more – all else equal?
A. Bond A
B. Bond B
C. Bond C
D. Not enough information to determine.
19. You have some information on two companies:
Company BVH TX inc.
Forecast return 12% 11%
Standard deviation of returns. 12% 14%
Beta 1.6 1.0
You also know that the T-bill rate is 4.80% and the market risk premium is 5.90%.
What would the return for BVH be; using the capital asset pricing model (CAPM)?
Type solution as a percentage (e.g. .01 write as 1) Do not add units.
20. In a strongly efficient market, portfolio management can provide the following benefits except:
A. Diversification.
B. Targeted risk levels.
C. Low-cost record keeping.
D. Superior risk-returns.
21. What is the expected rate of return for a stock that has a beta of <1 if the expected return on the market is 14%?
Write out one of the following exactly as displayed: “less than 14%”
“more than 14%”
“exactly 14%”
“Cannot be determined without the risk-free”
22. The standard deviation of return on stock FNG is 22.00%,
The standard deviation of return on stock BKKL is 17.00%.
If the covariance of returns on FNG and BKKL is .007, then correlation coefficient between the returns on FNG and BKKL is:
23. There is a risky portfolio composed of two stocks: JJH and VMN.
Stock JJH has an expected return of 18.00% and a standard deviation of return 34.00%.
Stock VMN has an expected return of 13.00% and a standard deviation of return 19.00%.
The correlation coefficient the two stocks (in terms of their return histories) is .5.
The risk-free rate of return is 9.00%.
The proportion of the optimal risky portfolio that should be invested in stock VMN is approximately:
Use decimal format (e.g. 20% write as .20)
24. The market cap rate for TLLM is 8.00%.
Expected ROE (return on equity) =10.00%.
Expected EPS (earnings per share) =$5.00.
Plowback rate=60.00%.
Calculate the price to earnings ratio of TLLM.
25. Calculate the beta of a portfolio with an expected return of 16.70%.
If the risk-free rate is equal to 5.00% and the expected market return is 14.00%.
26. If the efficient market hypothesis is accurate and reflects reality?
A. The prices reflect all information available
B. Prices do not fluctuate
C. Security prices change for no reason
D. Security prices can be forecasted
27. A portfolio is contains two stocks:
X and YT.
Stock X has a standard deviation of 24.00%: based on returns.
Stock YT has a standard deviation of return of 18.00%: based on returns.
Stock X is 60% of the portfolio, and stock YT carries the rest.
If the return variance of the portfolio is .041, then the
correlation coefficient between the returns on X and YT is:
28. CCVH has an EBIT (earnings before interest/taxes) of $300.00.
CCVH has a tax rate of 21.00%,
Depreciation=$20.00.
Capital expenditures=$60.00
The planned increase in working capital is $30.00.
Calculate the FFCF (free cash flow to the firm).
A. $128.00
B. $167.00
C. $202.00
D. $315.00
29. YYHJ has free cash flow to the firm=$205M.
YYHJ’s interest expense=$22M.
Tax rate is 35.00%
Net debt of the firm changes by +$3M.
Calculate the market value of equity if free cash flow to equity is grows at 3.00%
indefinitely.
Cost of equity=12.00%
A. $2,423.87M
B. $2,839.09M
C. $3,417.57M
D. $2,152.22M
30. A bond has a market price of $1,150.00.
The yield to maturity is 5.00%.
The yield increases by 10 basis points and the price of the bond falls by $20.00.
Calculate the duration of the bond.
A. 21.34
B. 18.26
C. 13.60
D. 14.92