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

by OC2686859

Department

Management, MarketingCourse Code

MGT 360Professor

Karen B HanenStudy Guide

FinalThis

**preview**shows page 1. to view the full**5 pages of the document.**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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