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CAPM predicts that alpha will have what value?  (2 pts) What does β measure?  (2 pts) Why do we optimize the Sharpe ratio? (2 pts)

Where in the course Canvas site can students access the course modules?

Use the data in the table below to answer the questions.  The 52-week T-bill is currently 5%. Scenario (Probability) Market Stock A Stock B Recession (40%) -30% -36% -18% Expansion (60%) 20% 24% 12%   What are E(rA), E(rB), and E(rM)? (6 pts) Assume βA = 1.25 and assume βB = 0.65.  Choose one of the following.  Show all work. (6 pts) Only stock A is overvalued Only stock B is overvalued Both A and B are overvalued Neither A nor B is overvalued Cannot determine.

Use the information below to find P2. ROE 8.46% Plowback Ratio 81% Earnings per Share $4.76 Market Cap Rate 9.95%

What is the expected return of a stock that trades at $61.00 today and is expected to trade at $63.75 and pay a $1.80 dividend at the end of the year?

Two firms have identical financial statements except that XYZ, Inc has a D/E ratio of 1.0 and ABC, Inc has no debt.  Which company’s shares would you rather own in a recession and why?

The market capitalization rate is 15.04%.  Expected ROE is 12.46% and expected EPS is $3.87.  If the firm’s plowback ratio is 51%, what is the forward P/E ratio?

a) Describe how a discounted cash flow model (DCF) arrives at FCFE0. b) Under what circumstances would you use a DCF model?

Where can students go to view important dates for this course, including the Course Content Schedule and all assignment due dates? 

Briefly describe the Statement of Cash Flows.