1. In January 2, 2008 the Dow closed at 13,043.96 points. In October 8 of the same year it closed 9,258.10. What was the return of the market in that period of time?

2. In September of 1984, Apple’s stock was trading at $3.36. In September of 2012 it was trading at $700.26. What is the return for an investor who bought the stock in 1984?

3. In February of 2008, AIG’s stock was trading at $937.20. In February 2009, the price was $8.40. What was the return for an investor who bought the stock in 2008?

4. Use Sharpe ratio to choose the investment that is better compensating investors for the risk they are taking. The risk free rate is 2%. Stock Expected return Standard Deviation X 7% 5% Y 10% 10% Z 15% 11%

24. Ms. Alicia Weir has been able to accumulate $10,000 in savings from her end-of-month salary and is seeking to invest this amount plus the regular monthly salary savings of $400 into a suitable investment. Given her risk profile, the People’s Preference Credit Union has been selected as the best financial intermediary to place her funds. The credit union has offered her a high-interest savings account with an interest rate of 8% compounded monthly for the next 4 years for the investment of Alicia’s accumulated and ongoing savings. a) What effective interest rate will Alicia be earning on her funds? b) What is the expected balance of the high-interest savings account at the end of the 4-year term?

A stock has an expected return of 15 percent, its beta is 0.45, and the risk-free rate is 7.5 percent. What must the expected return on the market be?

rev: 09_20_2012

25.38%

16.67%

22.96%

25.13%

24.17%

Your portfolio is invested 30 percent each in stocks A and C, and 40 percent in stock B. What is the standard deviation of your portfolio given the following information?   State of
  Economy Probability of
State of Economy Rate of Return
if State Occurs Stock A Stock B Stock C   Boom 0.25 0.25 0.25 0.45   Good 0.25 0.10 0.13 0.11   Poor 0.25 0.03 0.05 0.05   Bust 0.25 -0.04 -0.09 -0.09 12.38 percent 12.64 percent 12.72 percent 12.89 percent 13.97 percent

True or False In applying risk-adjusted discount rates to project selection, projects falling above the SML would have a positive NPV and those falling below the SML would have a negative NPV

Describe the features of a nonequivalent control group design and understand why this design is necessarily confounded.