Question description

The beta of Middle Earth Inc. stock is 1.6, and the risk-free rate of return is 8 percent. If the expected return on the stock market is 15 percent, then what is the expected rate of return on Middle Earth Inc. stock?
A. 24.0%
B. 32.0%
C. 12.8%
D. 11.2%
E. 19.2%
Gimli purchased a share of stock for $22 one year ago. During the time he owned the stock it paid $.97 in dividends. He just sold the stock for $25.30, what was his holding period of return?
A. 15.0%
B. 19.4%
C. 4.4%
D. 16.9%
E. 3.8%
Security analysts have evaluated Orc Industries and determined that there is a 15% chance that the firm will generate earnings per share of $2.40 next year; a 60% chance that the firm will generate earnings of $3.10 per share; and a 25% chance that the firm will generate earnings of $3.80 per share. What are the expected earnings per share for Orc Industries? (Round to the nearest $.01)
A. $2.81
B. $1.86
C. $2.91
D. $3.17
E. $3.10
Question 7
You are analyzing a project and estimate that it has the following potential return scenarios:
Return Probability
12% 15%
10% 50%
7% 35%
What is the expected rate of return on this project? (rounded to the nearest tenth of a percent)
A. 7.5%
B. 9.3%
C. some other amount.
D. 10%
E. 9.7%
What is the expected rate of return of Tolkien Industries stock given the risk free rate of return is 3% and the market rate of return is 11%. The company has a historical beta of .80.
A. 6.4%
B. 14%
C. 2.4%
D. 8.8%
E. 9.4%
Dwarf Brothers stock was priced at $15 per share two years ago when purchased. It now sells for $18 per share. In the last year the stock paid $1.00 per share in dividends. What was the total return for owning Dwarf Brothers stock? (Round to the nearest percent).
A. 27%
B. 20%
C. 22%
D. 7%
E. 33%
Which stock has the greater variation in price? Stock A, has a standard deviation of 4; Stock B, which has a standard deviation of 6; Stock C which has a standard deviation of 5.
A. Stock C
B. Stock B
C. Can’t tell with the information given.
D. Stock A