Assume market equilibrium

Assignment Help Financial Management
Reference no: EM131599712

Stock A's beta is 1.5 and Stock B's beta is 0.5. Which of the following statements must be true about these securities? (Assume market equilibrium.) a. When held in isolation, Stock A has more risk than Stock B. b. Stock B must be a more desirable addition to a portfolio than A. c. Stock A must be a more desirable addition to a portfolio than B. d. The expected return on Stock A should be greater than that on B. e. The expected return on Stock B should be greater than that on A.

Reference no: EM131599712

Questions Cloud

Stock price according to the constant growth dividend model : What is the stock price according to the constant growth dividend model?
What was your average and compound return : Assuming that the stock paid no dividends, then what was your average and compound return (respectively) if you sold the stock in Jan 1, 2003.
Monte carlo simulation : Assume you are a moderate risk taker and would like to have 10% ROI on financial investment stock you are making over the period of 7 years.
What is the one year foward rate expected on treasury bills : what is the 1 year foward rate expected on treasury bills during year 3, 3f1?
Assume market equilibrium : Stock A's beta is 1.5 and Stock B's beta is 0.5. Which of the following statements must be true about these securities?
Both bonds have the same maturity : Bond A has a 9% annual coupon, while Bond B has a 7% annual coupon. Both bonds have the same maturity, a face value of $1,000,
What will be your rate of return after one year : what will be your rate of return after one year if you cover you short position at $45?
Beta and market risk premium : The risk-free rate is 6%; Stock A has a beta of 1.0; Stock B has a beta of 2.0; and the market risk premium, rM - rRF, is positive.
At what price will you receive margin call : You short-sell 200 shares of ABC common stock on margin for $40 per share. At what price will you receive a margin call?

Reviews

Write a Review

Financial Management Questions & Answers

  The value of an asset in the economy is determined by

The value of an asset in the economy is determined by. Intrinsic Value refers to.

  What is aftertax salvage value of the asset

An asset used in a 4-year project falls in the 5-year MACRS class (MACRS Table) for tax purposes. The asset has an acquisition cost of $14,400,000 and will be sold for $3,200,000 at the end of the project. If the tax rate is 30 percent, what is the a..

  Is your portfolio less risky or more risky than market index

Your portfolio is diversified. It has an expected return of 11.0% and a beta of 1.10. You want to add 300 shares of Kraft Foods Inc at $40 a share to your portfolio. Calculate the expected beta on the portfolio after you have added Kraft Foods Inc's ..

  What final payment will the bank require

what final payment will the bank require you to make so that it is indifferent to the two forms of? payment?

  Determine effective annual return on the bond investment

Determine the effective annual return on the bond investment.

  Calculate book value of asset

Reversing Rapids Co. purchases an asset for $163,120. Calculate book value of an asset.

  Optimal risky portfolio from this stock and bond portfolio

what is the Sharpe ratio of the tangency portfolio formed by creating the optimal risky portfolio from this stock and bond portfolio?

  Payback-profitability index and internal rate of return

Financial manager computes the accounting return, payback, discounted cash flow valuation, profitability index, and internal rate of return.

  Compute the dividends over next five years

Suppose that firm's recent earnings per share and dividend per share are $2.90 and $2.10, respectively. Both are expected to grow at 8 percent. However, the firm's current P/E ratio of 22 seems high for this growth rate. the P/E ratio is expected to ..

  Calculate firm operating cash flow

The tax rate is 40%. Sketch (explain with a table or in words) a simplified income statement and calculate the firm’s operating cash flow.

  Assuming it adheres to its target capital structure

A company expects to earn $17 million in income this coming year. Its target capital structure is 30% debt, 15% preferred stock, and 55% common equity financing. The company normally pays a dividend equal to 30% of its earnings. At what point will it..

  What price per jar would project npv equal zero

What is project NPV under these base-case assumptions? At what price per jar would project NPV equal zero?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd