Department of Accounting Education

FIN 33 – Quiz
February 21, 2017

GENERAL INSTRUCTION: Always show your solution on each question. No Solution,

No Point policy must be observed.

Problem 1

Risk-free rate 4.8%

Market rate of return 12%
Beta:
Stock X 0.8
Stock Y 1.6
Stock Z 2.5
Required:
1. Compute for the portfolio beta coefficient assuming the investment proportion of
Stock X, Y and Z are 30%, 40% and 30% respectively.
2. Calculate the required rate of return of the portfolio using CAPM.

Problem 2

State of Probability of Rate of Return if State occurs

Economy Sate of Otwol PSY Co. Forevermore,
Economy Corp. Inc.
Boom 60% 18% 22% 24%
Recession 40% 4% 4% 6%

Required:
1. What would be the expected value on a portfolio if 35% of the portfolio is
invested in PSY Co., 50% in Forevermore, Inc., and the remaining is in OTWOL
Corp.?
2. Compute for the standard deviation on this portfolio.
3. Compute the Coefficient of Variation.

Problem 3

Yuri Company has expected earnings before interest and taxes (EBIT) of P800,000 and
interest costs of P80,000. The firm’s equity and debt capitalization rates are 12 percent
and 8 percent, respectively. Assume no corporate income taxes.
1. What is the market value of the firm?
2. What is the weighted average cost of capital?

God Bless!!
Ma’am Jazel