Approximate and exact expected real returns on the portfolio

Assignment Help Financial Management

Reference no: EM131070643

Consider the following information about three stocks: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom .26 .26 .38 .55 Normal .50 .21 .19 .17 Bust .24 .05 −.38 −.46

a-1 If your portfolio is invested 35 percent each in A and B and 30 percent in C, what is the portfolio expected return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Portfolio expected return 13.58 %

a-2 What is the variance? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.) Variance .05457

a-3 What is the standard deviation? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Standard deviation 23.36 %

b. If the expected T-bill rate is 4.10 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected risk premium 9.48 %

c-1 If the expected inflation rate is 3.70 percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Approximate expected real return % Exact expected real return %

c-2 What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Approximate expected real risk premium % Exact expected real risk premium %.

All the answers are correct I just need approximate and exact returns, C-1, and what are the ecpected and exact real premiums, C-2.

Reference no: EM131070643

Questions Cloud

Election is conducted under cumulative voting : An election is being held to fill four seats on the board of directors of a firm in which you hold stock. The company has 7,500 shares outstanding. If the election is conducted under cumulative voting and you own 360 shares, how many more shares must..

Depreciated by the straight-line method : W. Rooney Company. is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight-line method over its 3-year life, and would have a zero salvage value. What is th..

What is the cost of equity from retained earnings : H.Ibsen Corporation hired you as a consultant to help them estimate its cost of capital. You have been provided with the following data: D0 = $1.36; P0 = $20.50; and g = 6.50% (constant). Based on the DCF approach, what is the cost of equity from ret..

Standard deviation-what about triple in value : Assume that the returns from an asset are normally distributed. The average annual return for this asset over a specific period was 17.0 percent and the standard deviation in this period was 43.68 percent. What is the approximate probability that you..

Approximate and exact expected real returns on the portfolio : Consider the following information about three stocks: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom .26 .26 .38 .55 Normal .50 .21 .19 .17 Bust .24 .05 −.38 −.46. If your portfolio is in..

The firm is operating at less than full capacity : A firm’s profit margin is 5 percent, its debt/assets ratio is 56 percent, and its dividend payout ratio is 40 percent. If the firm is operating at less than full capacity. Then sales could increase to some extent without the need for external funds, ..

Call option-stock with an exercise price : A call option on Jupiter Motors stock with an exercise price of $100 and one-year expiration is selling at $6. A put option on Jupiter stock with an exercise price of $100 and one-year expiration is selling at $4.5. If the risk-free rate is 8% and Ju..

Calculate the total profit per share at expiration : IBM stock price/share Exercise prices May Call premium May Put premium. It is 35 days to expiration on the options, and the interest is 4% per annual continuously compounding for all maturities. Use continuous compounding throughout. Draw the total p..

The project using the discounting approach method : Slow Ride Corp. is evaluating a project with the following cash flows: Year Cash Flow 0 –$ 29,100 1 11,300 2 14,000 3 15,900 4 13,000 5 – 9,500 The company uses an interest rate of 8 percent on all of its projects. Calculate the MIRR of the project u..

User Account

All Pages