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You have been asked by the director of finance to put together a plan to invest in other companies. Your plan will manage a mutual fund with a $20 million portfolio with a beta of 1.50. Assume that the risk-free rate is 4.50%, and the market risk premium is 5.50%. You expect to receive an additional $5 million, which you plan to invest in a number of stocks. After investing the additional funds, you want the fund's required return to be 13%.
What must the average beta of the new stocks added to the portfolio be to achieve the desired required rate of return? Attach your Excel file showing your calculations.
In a Word document, explain the steps you used to arrive at your answers.
What does your calculated beta mean to UPC?
Should UPC be concerned about the use of betas in making investment decisions?
A stock price is currently $100. Over each of the next two six-month periods it is expected to go up by 10% or down by 10%. The risk-free interest rate is 8% per annum with continuous compounding. What is the value of a one-year European call opti..
Which of the following loan request by an off campus pizza parlor would be unacceptable, and why?
How do dividends impact the value of a share of stock? Are there any instances in which companies should not pay dividends?
If possible, please describe the advantages & disadvantages of using ILIT's in estate planning.
according to MM proposition I with taxes, what would be the increase in the value of the company after the loan?
For example, if an American firm wants to bring those profits back to the US to invest in a project, what risk does the company face?
Corporation A forecasts that sales next year will be $5,600. If I assume long-term debt remains constant, determine the value for external funds needed? I have the financial statement given below:
Provide some example of a situation that requires the establishment of a contingent liability? Why should a company establish a contingent liability? How does the establishment of a contingent liability impact earnings?
Projected fixed costs are $742,000 and the anticipated annual operating cash flow is $211,000. What is the degree of operating leverage for this project?
Compare the internal rate of return for both projects. Compute the NPV for both projects, using a cost of capital of 10 percent.
A mortgage loan in the amount of $100,000 is made at 12% interest for 20 years. Payments are to be monthly in each part of this problem.
Johnson currently maintains an average demand deposit of $80k. Estimate the cost of the line of credit to Johnson. c. Which source of credit should Johnson select, Why?
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