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You currently hold a diversified portfolio with a beta of 1.1. The value of your investment is $500,000. The risk-free rate is 3%, the expected return on the market is 8%.
a) Using the CAPM, calculate the expected return on your portfolio.
b) Suppose you sell $10,000 worth of Chevron stock (which is currently part of the portfolio) with a beta of 0.8 and replace it with $10,000 worth of JP Morgan stock with a beta of 1.6. What will be beta of your new portfolio?
c) Suppose one of the stocks currently in your portfolio has beta of -.1. What is the expected return on this stock? Compare this stock to the risk-free asset. Aren’t you better off selling this stock and replacing it with the risk-free asset? Why or why not?
d) Suppose one of the stocks currently in your portfolio has beta of 0. What is the expected return on this stock? Compare this stock to the risk-free asset. Aren’t you better off selling this stock and replacing it with the risk-free asset? Why or why not?
You are considering undertaking a land improvement practice that will cost you $120 per acre to establish and an additional $8 per acre to maintain over the next 10 years. Assuming a real discount rate of 4%, what is the present value of the total co..
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The common stock of Sweet Treats has a total return of 11.62 percent, a stock price of $48.20, and recently paid an annual dividend of $2.38. What is the capital gains rate if the company maintains a constant dividend?
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The holder of convertible bond has the right to acquire the shares of company to redeem the bond three years from the issue of the bond.
Which of the following statements concerning existing projects is true?
Weir Incorporated has sales of $200,000 and accounts receivable of $18,500. You can easily show that its DSO is well over the industry average of 27 days. Suppose that it speeds up collection, matches the industry average, and manages to earn 8% inte..
Atlas Corp. is considering two mutually exclusive projects. what is the value of NPVL- NPVS?
Given the following information; Risk free rate = 3%, Volatility = beta= 5.6,
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