A friend tips you off on a hot stock: Sure Thing Mines Ltd. You ...

[CharlieWard]

A friend tips you off on a hot stock: Sure Thing Mines Ltd. You only have 10,000 to invest but you want to invest more. Assume that you can borrow an additional 5,000 by short-selling the risk free asset (issuing T-Bills).
 
  You purchase 15,000 worth of shares in Sure Thing Mines Ltd.
  The expected returns and standard deviations of the two assets are outlined in the table below:
 
  Asset Expected Return Beta
  T-Bills 5.5 0
  Sure Thing Mines 15 1.70
 
  What is the beta of the portfolio?
  A) 1.50
  B) 1.70
  C) 2.50
  D) 2.55
  E) 2.70

Question 2

The present value of 100 to be received 10 years from today, assuming an opportunity cost of 9 percent, is: (Round to the nearest whole dollar)
 
  A) 236
  B) 699
  C) 42
  D) 75
  E) 50

[frejo]

Answer to Question 1

D

Answer to Question 2

C