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Assume a market index represents the common factor and all stocks in the economy have a beta of 1. Firm-specific returns all have a standard deviation of 47%. Suppose an analyst studies 20 stocks and finds that one-half have an alpha of 4.5%, and one-half have an alpha of 4.5%. The analyst then buys $1.5 million of an equally weighted portfolio of the positive-alpha stocks and sells short $1.5 million of an equally weighted portfolio of the negative-alpha stocks.
a. What is the expected return (in dollars), and what is the standard deviation of the analyst’s profit? (Enter your answers in dollars not in millions. Do not round intermediate calculations.Round your answers to the nearest dollar amount.)
Expected Return $
Standard Deviation $
b-1. How does your answer change if the analyst examines 50 stocks instead of 20? (Enter your answer in dollars not in millions.Do not round intermediate calculations. Round your answer to the nearest dollar amount.)
b-2. How does your answer change if the analyst examines 100 stocks instead of 20? (Enter your answer in dollars not in millions.)
Fleury Co. has a 38 percent tax rate. Its total interest payment for the year just ended was $24 million. Required: What is the interest tax shield?
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What is the principal for first year
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If you want to have $1,250,000 at retirement in 32 years, how much will you have to save every two weeks at 10.5% to achieve the goal? If you have $1,000,000 at retirement, how much can you withdraw every month over the 25 years of your retirement if..
important in order to receive full credit you need to answer the questions with a minimum of twoparagraphs. use one
According to the Dividend Valuation Model for common stocks, what do you think woud happen if the Fed stopped purchasing government securities?
Choose a health care facility that you are currently working with or one that you would like to work for in the future. This facility will be used throughout the course as you plan your capital investment budget.
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