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Final

MGT 360 Study Guide - Final Guide: Capital Asset, Net Present Value, Capital Asset Pricing ModelExam


Department
Management, Marketing
Course Code
MGT 360
Professor
Karen B Hanen
Study Guide
Final

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Chapter 5 & 6
You plan to buy a new car. The price is $30,000 and you will make a down payment
of $4,000. Your annual interest rate is 10% and you intend to pay for the car over five
years. What will be your monthly payment?
How much do you have to deposit today so that beginning 11 years from now
you can withdraw $10,000 a year for the next 5 years (periods 11 through 15)
plus an additional amount of $20,000 in that last year (period 15)? Assume an
interest rate of 6 percent.
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Chapter 7
David is going to purchase two stocks to form the initial holdings in his portfolio. Iron
stock has an expected return of 20 percent, while Copper stock has an expected return
of 23 percent.
a) If David plans to invest 30 percent of his funds in Iron and the remainder in
Copper, what will be the expected return from his portfolio?
b) What would the expected return of David's portfolio invests 70 percent of his
funds in Iron stock?
You have just invested in a portfolio of three stocks. The amount of money that you
invested in each stock and its beta are summarized below.
A
$194,000
1.56
B
291,000
0.69
C
485,000
1.34
Calculate the beta of the portfolio and use the capital asset pricing model (CAPM) to
compute the expected rate of return for the portfolio. Assume that the expected rate of
return on the market is 16 percent and that the risk-free rate is 6 percent.
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