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Assume that investors are maximizing the expected return subject to not exceeding standard deviation they are able to tolerate. There are 2 assets available for all investors. The first asset is the stock market which provides the expected return of 15% and has the standard deviation of 20%. The second asset is the bank account which pays the interest rate of 1%.The expected return of the second asset is 1%. The bank generates profits by borrowing to customers at a higher rate than the interest rate it is paying on their bank accounts, so the bank will only borrow you money at 5% rate. Derive the formula for the capital market line (expected return as a function of the standard deviation) and draw it (drawing approximately by hand is perfectly ok).
Hint 1: Divide the capital market line in two parts: where you put money into the bank account and where you borrow.
In the 5-Stage DuPont ROE formula, which of the following is considered a utilization ratio:
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If the consumer price index increases from 110 to 113 in a month, how much higher is the effective annual rate of inflation than the annualized rate of inflation? A. +9.0% B. +9.2% C. +9.4% D. +9.6% E. +9.9%
Determine the least expensive way of manufacturing and shipping locks from its plants to the distributors.
Show how to combine a currency swwap paying Swiss francs at a floating rate and receiving Japanese yen at a floating rate with another currency swap to obtain a plain vanilla swap paying Swiss francs at a floating rate and receiving Swiss francs at a..
Construct Jackson's budget constraint and his time constraint on the same diagram.
How much did the company raise in the form of net new equity during 2013? What is the cash flow from assets during 2013?
Costs associated with the manufacture of a machine are $ 75,000 per year. They found that by spending $ 16,000 now to reconfigure the machine, the cost will go down to $ 58,000 next year and $ 62,000 in year 2 through 6. Using an interest rate of 10%..
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