Tanzlin Manufacturing's common stock has a beta of 1.5. If the expected risk-free return is 2%

Tanzlin Manufacturing's common stock has a beta of 1.5. If the expected risk-free return is 2% and the expected return on the market is 14%, what is the expected return on the stock?

A) 13.5%

B) 21.0%

C) 16.8%

D) 20.0%

Given the capital asset pricing model, a security with a beta of 1.5 should return ________, if the risk-free rate is 3% and the market return is 11%.

A) 16.5%

B) 14.0%

C) 14.5%

D) 15.0%

The security market line (SML) relates risk to return, for a given set of market conditions. If expected inflation increases, which of the following would most likely occur?

A) The market risk premium would increase.

B) Beta would increase.

C) The slope of the SML would increase.

D) The SML line would shift up.

The security market line (SML) relates risk to return, for a given set of market conditions. If risk aversion increases, which of the following would most likely occur?

A) The market risk premium would increase.

B) Beta would increase.

C) The slope of the SML would increase.

D) The SML line would shift up.

The Elvis Alive Corporation, makers of Elvis memorabilia, has a beta of 2.35. The return on the market portfolio is 12%, and the risk-free rate is 2.5%. According to CAPM, what is the risk premium on a stock with a beta of 1.0?

A) 12.00%

B) 22.33%

C) 9.5%

D) 14.5%

Bell Weather, Inc. has a beta of 1.25. The return on the market portfolio is 12.5%, and the risk-free rate is 5%. According to CAPM, what is the required return on this stock?

A) 20.62%

B) 9.37%

C) 14.37%

D) 15.62%

The expected return on MSFT next year is 12% with a standard deviation of 20%. The expected return on AAPL

The expected return on MSFT next year is 12% with a standard deviation of 20%.  The expected return on AAPL next year is 24% with a standard deviation of 30%.  The correlation between the two stocks is .6.  If James makes equal investments in MSFT and AAPL, what is the expected return on his portfolio.

A) 21.45%

B) 25.00%

C) 4.60%

D) 15.00%

Use the following information, which describes the possible outcomes from investing in a particular asset, to answer the following question(s).

        State of the Economy         Probability of the States       Percentage Returns

        Economic recession                              25%                                         5%

        Moderate economic growth               55%                                        10%

        Strong economic growth                     20%                                        13%

9) The expected return from investing in the asset is

A) 9.00%.

B) 9.35%.

C) 10.00%.

D) 10.55%.

10) The standard deviation of returns is

A) 8.00%.

B) 7.63%.

C) 4.68%.

D) 2.76%.

The expected return on MSFT next year is 12% with a standard deviation of 20%.  The expected return on AAPL next year is 24% with a standard deviation of 30%.  If James makes equal investments in MSFT and AAPL, what is the expected return on his portfolio.

A) 20%

B) 16%

C) 18%

D) 25%

A company issued 1,000 shares of $1 par value preferred stock for $5 per share. What is true about the journal entry to record the issuance?

A) Debit Preferred Stock $5,000.

B) Credit Cash $5,000.

C) Credit Preferred Stock $5,000.

D) Credit Additional Paid-In Capital $4,000.

Answer: D

Which of the following has the lowest expected return to the investor?

A) Bonds.

B) Preferred Stock.

C) Common Stock.

D) They all have similar expected returns.

Answer: A

Which of the following is not a potential feature of preferred stock?

A) Convertible.

B) Redeemable.

C) Cumulative.

D) They all are potential features of preferred stock.

Answer: D

Wright Inc. issued 20,000 shares of $1 par value common stock for $80,000. The journal entry to record this issuance includes a:

A) Credit to Common Stock for $80,000.

B) Debit to Additional Paid-In Capital for $60,000.

C) Credit to Cash for $80,000.

D) Credit to Common Stock for $20,000.

Answer: D

Jade Jewelers issued 15,000 shares of $1 par value stock for $20 per share. What is true about the journal entry to record the issuance?

A) Credit Common Stock $300,000.

B) Credit Cash $300,000.

C) Credit Common Stock $15,000.

D) Debit Additional Paid-In Capital $285,000.

Answer: C

Which of the following has the highest expected return to the investor?

A) Common Stock.

B) Preferred Stock.

C) Bonds.

D) They all have similar expected returns.

Answer: A