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Portfolio standard deviation and diversification: You are asked to give financial advice to a mutual fund manager. The fund has had a history of investing in an equally-weighted portfolio of 50 stocks and is considering cutting down the number of stocks to 10 or 20. You assume that all stocks the fund is considering investing in have the same standard deviation of 40% and that the correlation between each pair of stocks is identical and equal to 0.25.
a. To start your analysis, you calculate the standard deviation of the equally weighted portfolios with 10, 20, and 50 assets.
b. Given your answers to part a. what is the advice that you give the mutual fund manager?
Fresh Fruit, Inc. has a $1,000 par value bond that is currently selling for $1,005. It has an annual coupon rate of 9.34 percent, paid semiannually, and has 29-years remaining until maturity. What would the annual yield to maturity be on the bond if ..
Becky Fenton has 70/140/80 automobile insurance coverage. If two other people are awarded $115,000 each for injuries in an auto accident in which Becky was judged at fault, how much of this judgment would the insurance cover?
Show that, if C is the price of an American call with exercise price K and maturity T on a stock paying a dividend yield of q, and P is the price of an American put on the same stock with the same strike price.
Given the following information, determine the beta coefficient for Stock L that is consistent with equilibrium: = 12.5%; rRF = 5.1%; rM = 12%.
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Use function “PMT” to calculate your mortgage payment. Use function “RATE” to calculate the interest rate given a payment of $1500 and a loan amount of $400,000
Suppose CBI faces a withdrawal of $50 billion dollars. Show four different ways CBI can deal with this problem.
Define and provide an example of an Opportunity Cost. Explain the Price of a forward rate agreement.
Cuda Marine Engines, Inc. must develop the relevant cash flows for a replacement capital investment proposal. The proposed asset costs $50,000 and has installation costs of $3,000. The asset will be depreciated using a five-year recovery schedule. Th..
Compute the CCA depreciation amounts for each year assuming that this asset belongs to Class 46.
To date, she has saved nothing, but she still has 30 years until she retires. How much money does she need to contribute per month to reach her goal?
Bond A's price exceeds its par value, Bond B's price equals its par value, and Bond C's price is less than its par value.
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