Corporate Finance 7.5 ECTS
Ladok code: 21FT1C
The exam is given to:
Exam
Code:
Date of exam: 2019-12-02
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. (4 points)
Calculate the expected return and the standard-deviation (=risk) for the stock
portfolio given below.
Portfolios Expected Standard- Correlation between the stocks
Stock hare return deviation Stock 1 Stock 2 Stock 3
Stock 40 % 15 % 20 % 1,0 0,3 0,4
1
Stock 30 % 20 % 30 % 0,3 1,0 0,2
2
Stock 30 % 25 % 40 % 0,4 0,2 1,0
3
Question 2. (3 points)
Suppose that Apple computer, which is currently trading for $30 per share and
has currently 1000 shares outstanding, will do the following types of stock
splits.
a/ A 5-for-1 stock split.
b/ A 1-for-4 reverse split.
c/ A 50% stock dividend.
What is the share price in a/ to c/ after the stock splits?
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 then
a/ The risk-free rate of return
b/ The expected return of the market
, 2
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)
c/ What is the expected return for the assets of your company ?
d/ What is the expected return of the equity of your company ?
Ladok code: 21FT1C
The exam is given to:
Exam
Code:
Date of exam: 2019-12-02
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. (4 points)
Calculate the expected return and the standard-deviation (=risk) for the stock
portfolio given below.
Portfolios Expected Standard- Correlation between the stocks
Stock hare return deviation Stock 1 Stock 2 Stock 3
Stock 40 % 15 % 20 % 1,0 0,3 0,4
1
Stock 30 % 20 % 30 % 0,3 1,0 0,2
2
Stock 30 % 25 % 40 % 0,4 0,2 1,0
3
Question 2. (3 points)
Suppose that Apple computer, which is currently trading for $30 per share and
has currently 1000 shares outstanding, will do the following types of stock
splits.
a/ A 5-for-1 stock split.
b/ A 1-for-4 reverse split.
c/ A 50% stock dividend.
What is the share price in a/ to c/ after the stock splits?
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 then
a/ The risk-free rate of return
b/ The expected return of the market
, 2
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)
c/ What is the expected return for the assets of your company ?
d/ What is the expected return of the equity of your company ?
