1. Using the table below, calculate theStandard Deviationof the portfolio:

Demand for Company Products	Probability of this Demand Occurring	Rate of Return if this demand Occurs (k)
Weak	0.15	-30%
Below average	0.25	-15%
Average	0.25	10%
Above Average	0.20	25%
Strong	0.15	45%

a. 7.50% b. 7.00% c. 22.05% d. 24.68%

2. Mitchell Investments has offered you the following investment opportunity:

$6,000 at the end of each year for the first 5 years, plus

$3,000 at the end of each year from years 6 through 10, plus

$2,000 at the end of each year from years 11 through 20.

How much would you be willing to pay for this investment if you required a 12 percent rate of return?

a. $65,358.25

b. $31,403.44 c. $81,316.38

d. $92,812.43

e. $66,214.10

3. Two securities have the following characteristics:

	Security A	Security B
Expected return	25%	15%
Standard deviation	35%	47%
Proportion (Weight)	45%	55%
Beta	1.3	0.45
Correlation Coefficient		0.70

Determine the risk (standard deviation) of the portfolio with Securities A and B.

a. 34.80% b. 29.53%

c. 25.25% d. 38.55%

4. The Fleming Company, a food distributor, is considering replacing a filling line at its Oklahoma City warehouse. The existing line was purchased several years ago for $3,600,000. The line's book value is $445,000, and Fleming's management feels it could be sold at this time for $350,000. A new, increased capacity line can be purchased for $2,575,000 and will require and increase in NWC of $55,000. Delivery and installation of the new line are expected to cost $50,000 and 215,000 respectively. Assuming Fleming's marginal tax rate is 35%, calculate the net investment for the new line.

a. $2,456,750 b. $2,490,000 c. $2,895,000 d. $2,511,750