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11. One year from today, a stock is expected to pay a dividend of $8 and then to sell at a price of $109. The risk-free interest rate is 4%, the expected market return is 12% and the stock has a beta of 0.8. What is the stock price today? a. $102.99. b. $98.73. c $105.98. d. $109.00 A stock's risk premium is equal to the: a. expected market return times beta. b. Treasury bill yield plus the expected market return. c. risk-free rate plus the expected market risk premium. d. expected market risk premium times beta. 12. The slope of the security market line equals: a. one b. beta. c. the market risk premium. d. the expected return on the market portfolio. 13. Your broker mailed you your year-end statement. You have $25,000 invested in Dow Chemical, $18,000 tied up in GM, $36,000 in Microsoft stock, and $11,000 in Nike. The betas for each of your stocks are 1.55 for Dow, 1.12 for GM, 2.39 for Microsoft, and .76 for Nike. What is the beta of your portfolio? a. 1.46 b. 1.70 c. 2.60 d. 0.41 14. 15. Which of the following is true? Systematic, or market, risk cannot be eliminated through diversification b. a. Both systematic and unsystematic risk can be eliminated through diversification. Unsystematic, or company, risk cannot be reduced through diversification. d. c. Neither systematic nor unsystematic risk can be reduced through diversification. An investor expects a return of 14.7% on her portfolio with a beta of 1.13. If the expected market risk premium decreases from 8% to 7%, what return should she now expect on the portfolio? a. 13.57% b. 15.87% ?. 13.89% d. 14.67% 16

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