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ABC Company holds a well-diversified portfolio in the amount of $90,000 that has an expected return of 11.0% and a beta of 1.24 . It is buying 1,000 shares of DEF Company stock at $10 a share and adding them to its portfolio. DEF Company has an expected return of 13.0% and a beta of 1.46 . Currently, the risk free rate is 3.5%, and the stock market return is 8.2%. What will the required rate of return on the new portfolio be after the purchase of DEF stock? (Hint: Compute a new portfolio beta first and then use the CAPM.) 9.43% 9.52% 9.75% 9.61% 9.36% ABC Company is considering a project that has the following cash flow data. What is the project's payback period? (in year) 2.47 2.53 2.49 2.45 2.51 Which of the following would DECREASE the NPV of a project being considered, other things held constant? All of the changes would increase the NPV of a project. Spreading over the initial investment over the first two years rather than making it in the first year. A shift from straight line to MACRS depreciation method. An increase in net working capital in year 1. A decrease in the cost of capital for the project. Stock X has a beta of 0.5 and Stock Y has a beta of 1.5. Which of the following statements must be true about these securities? (Assume market equilibrium.) Stock Y's realized return next year will be higher than Stock X 's return. Stock Y has a higher standard deviation than Stock X. If the market risk premium declines, Stock X will have a larger decline in its required return than Stock Y. If the expected rate of inflation increases but the market risk premium is unchanged, the required return on Stock Y will increase by more than that on Stock X. If you invest $50,000 in each of Stocks X and Y, your 2-stock portfolio will have a required return that is equal to the market return

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