Question 1 (1 point)
You have chosen biology as your college major because you would like to be a medical doctor. However, you find that the probability of being accepted into medical school is about 10 percent. If you are accepted into medical school, then your starting salary when you graduate will be $300,000 per year. However, if you are not accepted, then you would choose to work in a zoo, where you will earn $40,000 per year. Without considering the additional educational years or the time value of money, what is your expected starting salary as well as the standard deviation of that starting salary?
Question 1 options:

Expected Salary $42,000; Std. Deviation $81,000 

Expected Salary $54,000; Std. Deviation $78,000 

Expected Salary $66,000; Std. Deviation $78,000 

None of the above 
Given the returns and probabilities for the three possible states listed here, calculate the covariance between the returns of Stock A and Stock B. For convenience, assume that the expected returns of Stock A and Stock B are 0.10 and 0.16, respectively. (Round your answer to 4 decimal places. For example .1244)

Probability 
Return(A) 
Return(B) 
Good 
0.35 
0.30 
0.50 
OK 
0.50 
0.10 
0.10 
Poor 
0.15 
0.25 
0.30 
Your Answer:
Question 2 options:

Answer 
In order to fund her retirement, Michele requires a portfolio with an expected return of 0.10 per year over the next 30 years. She has decided to invest in Stocks 1, 2, and 3, with 25 percent in Stock 1, 50 percent in Stock 2, and 25 percent in Stock 3. If Stocks 1 and 2 have expected returns of 0.10 and 0.08 per year, respectively, then what is the minimum expected annual return for Stock 3 that will enable Michele to achieve her investment requirement?
Your Answer:
Question 3 options:

Answer 
The risk per unit of return is measured by the
Question 4 options:

coefficient of variation 

median. 

variance. 

standard deviation. 
Lee purchased a stock one year ago for $25. The stock is now worth $33, and the total return to Lee for owning the stock was 0.36. What is the dollar amount of dividends that he received for owning the stock during the year?
Your Answer:
Question 5 options:

Answer 
The beta of M Simon Inc., stock is 1.4, whereas the riskfree rate of return is 0.10. If the expected return on the market is 0.14, then what is the expected return on M Simon Inc?
Your Answer:
Question 6 options:

Answer 
London purchased a piece of real estate last year for $82,600. The real estate is now worth $102,000. If London needs to have a total return of 0.22 during the year, then what is the dollar amount of income that she needed to have to reach her objective?
Your Answer:
Question 7 options:

Answer 
The riskfree rate of return is currently 0.05, whereas the market risk premium is 0.05. If the beta of RKP, Inc., stock is 1.5, then what is the expected return on RKP?
Your Answer:
1.Calculating the variance and standard deviation: Kate recently invested in real estate with the intention of selling the property one year from today. She has modeled the returns on that investment based on three economic scenarios. She believes that if the economy stays healthy, then her investment will generate a 30 percent return. However, if the economy softens, as predicted, the return will be 10 percent, while the return will be –25 percent if the economy slips into a recession. If the probabilities of the healthy, soft, and recessionary states are 0.4, 0.5, and 0.1, respectively, then what are the expected return and the standard deviation for Kate’s investment?
Subject  Business 
Due By (Pacific Time)  10/12/2014 05:00 pm 
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