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Two-Asset Portfolio
Stock A has an expected return of 13% and a standard deviation of 35%. Stock B has an expected return of 19% and a standard deviation of 60%. The correlation coefficient between Stocks A and B is 0.2. What is the expected return of a portfolio invested 35% in Stock A and 65% in Stock B? Round your answer to two decimal places.
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What is the standard deviation of a portfolio invested 35% in Stock A and 65% in Stock B? Round your answer to two decimal places.
Calculate the insurance premium. Assume that the volatility of the index is 15% per annum and the dividend yields and the riskOfree interest rate when expressed as simple rates are approximately the same as the continuously compounded..
The Trektronics store begins each week with 460 phasers in stock. This stock is depleted each week and reordered. The carrying cost per phaser is $41 per year and the fixed order cost is $84. What are the current total carrying costs? What is the eco..
Stock R has a beta of 1.3, Stock S has a beta of 0.70, the expected rate of return on an average stock is 11%, and the risk-free rate is 3%. By how much does the required return on the riskier stock exceed the required return on the riskier stock exc..
Identify and briefly describe two phases of the capital budgeting process. (b) Would saving time by skipping one of these phases in the capital budgeting process make sense financially?
A stock is currently selling for $40 a share. If the firm declares a 3-for-2 stock dividend there will be:
We examined two very important topics in finance this week; Capital Budgeting and Dividend Policy.
Sunshine Co Ltd produces two types of window frame, aluminium and wooden. The company’s simple costing system has two direct cost categories (materials and labour) and one indirect cost pool. Calculate the cost of an aluminium window frame and a wood..
The risk-free rate is 5 percent and the expected return on the market portfolio is 9 percent. If a company has a beta of 0.90, what is the stock's expected rate of return according to CAPM?
You short-sell 500 shares of a stock for one year – i.e., you borrow and sell the shares at time t = 0, and you purchase and return the shares at time t = 1. At time t = 0, the ask and bid prices of the stock per share are 75.25 and 73.50, respective..
Once an airline publishes its schedule, the short run marginal cost of an additional passenger is very low. Explain why the operation of revenue management systems may set some ticket prices below that needed to cover fully-allocated cost.
If we assume that the annual return on common stocks are normally distributed, then approximately 99% of the returns will fall within the range % if the average historical return is 6.1% with a standard deviation of 8.6%.
What is the difference between the (ordinary) break-even point and the cash break-even point and which will be the greater? Pharmaceutical Bhd manufactures medical products which are sold to pharmacies and clinics. The average selling price of its fi..
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