Corporate Finance 7.5 ECTS
Ladokcode: 21FT1C
The exam is given to:
ExamCode:
Date of exam: 2020-12-04
Time: 09-
13
Means of assistance:
Calculator
Total amount of point on exam: 40 points
Requirements for grading:
To get respective grade the the following points is required:
< 20 points = FX =U
20 points = E =G
22 points = D
26 points = C
30 points = B = VG
34 points = A
Next re-exam date: Exact date not decided yet
The marking period is, for the most part, 15 working days,
otherwise it’s the following date:
Important! Do not forget to write the ExamCode on each paper
you hand in.
Good Luck!
, 1
Examiner: Urban Österlund
Phone number: 0704-
38 33 68
Question 1. (4 points)
Calculate the expected return and the standarddeviation (=risk) for the
stockportflio given below.
Portfolio Expected Standard- Correlation between the stocks
Stock share return deviation Stock 1 Stock 2 Stock 3
Stock 1 40 % 15 % 20 % 1,0 0,3 0,4
Stock 2 30 % 20 % 30 % 0,3 1,0 0,2
Stock 3 30 % 25 % 40 % 0,4 0,2 1,0
Question 2. (3 points)
Muggen is capitalized with equity and convertible bonds. The convertible debt
has a face value of $10 000, a coupon rate of 6%, 5 years to maturity, and a
conversion price of $100 per share. The yield on similar nonconvertible bonds is
5%.
a/ What is the minimum price at which Muggen´s convertible debt should
sell if the market price of Muggen´s stock is $120 per share ?
b/ What is the minimum price if the stock price is $80 per share ?
Question 3. (5 points)
If stock X has a beta of 0,5 and an expected return of 7,5 %, and stock Y has a
beta of 1,8 and an expected return of 20,5 %, What is than
a/ The risk-free rate of return
b/ The expected return of the market
You are interested to know the capital cost of your company. You find out that
the average beta-value for the stocks of a group of company in your business is
equal to 1,9 and that their average debt to equity ratio is 2,0. Your company has
a debt to equity ratio of 2,5. If the risk-free interest rate is 6 % and the
riskpremium of the market portfolio is equal to 8 %: (Assume that the debt is
risk-free)
Ladokcode: 21FT1C
The exam is given to:
ExamCode:
Date of exam: 2020-12-04
Time: 09-
13
Means of assistance:
Calculator
Total amount of point on exam: 40 points
Requirements for grading:
To get respective grade the the following points is required:
< 20 points = FX =U
20 points = E =G
22 points = D
26 points = C
30 points = B = VG
34 points = A
Next re-exam date: Exact date not decided yet
The marking period is, for the most part, 15 working days,
otherwise it’s the following date:
Important! Do not forget to write the ExamCode on each paper
you hand in.
Good Luck!
, 1
Examiner: Urban Österlund
Phone number: 0704-
38 33 68
Question 1. (4 points)
Calculate the expected return and the standarddeviation (=risk) for the
stockportflio given below.
Portfolio Expected Standard- Correlation between the stocks
Stock share return deviation Stock 1 Stock 2 Stock 3
Stock 1 40 % 15 % 20 % 1,0 0,3 0,4
Stock 2 30 % 20 % 30 % 0,3 1,0 0,2
Stock 3 30 % 25 % 40 % 0,4 0,2 1,0
Question 2. (3 points)
Muggen is capitalized with equity and convertible bonds. The convertible debt
has a face value of $10 000, a coupon rate of 6%, 5 years to maturity, and a
conversion price of $100 per share. The yield on similar nonconvertible bonds is
5%.
a/ What is the minimum price at which Muggen´s convertible debt should
sell if the market price of Muggen´s stock is $120 per share ?
b/ What is the minimum price if the stock price is $80 per share ?
Question 3. (5 points)
If stock X has a beta of 0,5 and an expected return of 7,5 %, and stock Y has a
beta of 1,8 and an expected return of 20,5 %, What is than
a/ The risk-free rate of return
b/ The expected return of the market
You are interested to know the capital cost of your company. You find out that
the average beta-value for the stocks of a group of company in your business is
equal to 1,9 and that their average debt to equity ratio is 2,0. Your company has
a debt to equity ratio of 2,5. If the risk-free interest rate is 6 % and the
riskpremium of the market portfolio is equal to 8 %: (Assume that the debt is
risk-free)
