The following represents the probability distribution of future returns for stock A and stock B. State of Economy Probability Return on Security A Return on Security B state 1 0.35 1% 22% state 2 0.30 6% 20% state 3 0.10 9% 18% state 4 0.25 15% −4% (Each of parts a-d is worth 2 pts.; part e is worth 3 pts.) a. What are the expected returns on securities A and B? b. What is the standard deviation of the returns for each of the securities? c. Consider a portfolio consisting of 60% investment in security A and 40% in security B. According to the forecasted returns, what will be the portfolio’s return if the "state 1" economy emerges? d. Continuing with the same portfolio, what is the expected return on a portfolio consisting of 60% investment

The cost of capital: introduction the cost of capital: introduction companies issue bonds, preferred stock, and common equity to aise capital to invest in capital budgeting projects. capital is』necessary factor of production and like any other factor, it has a cost. this cost is equal to the select the applicable security. the rates of return that investors require on bonds, preferred stocks, and common equity represent the costs of those securities to the firm. companies estimate the required returns on their securities, calculate a weighted average of the costs of their different types of capital, and use this average cost for capital budgeting purposes. required return on rate: when calculating om operations when the firm's primary financial objective is to select shareholder value. to do this, companies invest in projects that earnselect their cost of capital. so, the cost of capital is often referred to as the -select -select and accruals, which a se spontaneously we hted average cost of capital wa c our concern is with capital that must be provided by select- 쑤 interest-bearing debt preferred stock and common equity. capital budgeting projects are undertaken, are not included as part of total invested capital because they do not come directly from investors. which of the following would be included in the caculation of total invested capital? choose the response that is most correct a. notes payable b. taxes payable c retained earnings d. responses a and c would be included in the calculation of total invested capital. e. none of the above would be included in the cakulation of total invested capital.

Why entrepreneurs start businesses. a) monopolistic competition b) perfect competition c) sole proprietorship d) profit motive

If an investment has 35 percent more nondiversifiable risk than the market portfolio, its beta will be: