Corporate Finance 7.5 ECTS
Ladok code: 21FT1C
The exam is given to:
Exam
Code:
Date of exam: 2019-10-30
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 Exam Code on each
paper you hand in.
Good Luck!
, 1
Examiner: Urban Österlund
Phone number: 0704-
38 33 68
Question 1. (6 points)
Use the following information for stock C and for the market
portfolio to solve the following questions.
State of the Probability Return Return
economy of state on C on market
Rapid growth 0,10 0,25 0,18
Moderate growth 0,20 0,10 0,20
Normal growth 0,50 0,15 0,04
Recession 0,20 -0,12 0,00
a/ What is the expected return for stock C and for the market portfolio ? (1p)
b/ What is the standard deviation for stock C and the market portfolio ? (2p)
c/ What is the covariance and the correlation between stock C and the market
portfolio ? (2p)
d/ Calculate the beta-value for stock C. (1p)
Question 2. (4 points)
You have decided to invest $1 million in an equally weighted portfolio of Cisco
and Yahoo: Expected Return Standard Deviation
Cisco 28.5% 75.3%
Yahoo 163% 244%
Equally-weighted portfolio 95,75% 118%
In addition you are going to borrow $500,000 from your margin account and
invest it in the portfolio as well. If the borrowing rate is 6%, what is the
expected return and standard deviation of your portfolio?
Question 3. (3 points)
The NOGROWTH Company has a perpetual EBIT of $ 60 million per year. The
after-tax, all equity discount rate rU is 8 percent. The company`s tax rate is 30
Ladok code: 21FT1C
The exam is given to:
Exam
Code:
Date of exam: 2019-10-30
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 Exam Code on each
paper you hand in.
Good Luck!
, 1
Examiner: Urban Österlund
Phone number: 0704-
38 33 68
Question 1. (6 points)
Use the following information for stock C and for the market
portfolio to solve the following questions.
State of the Probability Return Return
economy of state on C on market
Rapid growth 0,10 0,25 0,18
Moderate growth 0,20 0,10 0,20
Normal growth 0,50 0,15 0,04
Recession 0,20 -0,12 0,00
a/ What is the expected return for stock C and for the market portfolio ? (1p)
b/ What is the standard deviation for stock C and the market portfolio ? (2p)
c/ What is the covariance and the correlation between stock C and the market
portfolio ? (2p)
d/ Calculate the beta-value for stock C. (1p)
Question 2. (4 points)
You have decided to invest $1 million in an equally weighted portfolio of Cisco
and Yahoo: Expected Return Standard Deviation
Cisco 28.5% 75.3%
Yahoo 163% 244%
Equally-weighted portfolio 95,75% 118%
In addition you are going to borrow $500,000 from your margin account and
invest it in the portfolio as well. If the borrowing rate is 6%, what is the
expected return and standard deviation of your portfolio?
Question 3. (3 points)
The NOGROWTH Company has a perpetual EBIT of $ 60 million per year. The
after-tax, all equity discount rate rU is 8 percent. The company`s tax rate is 30
