Reference no: EM1373164
5) If the expected returns for risk free asset and a risky asset are 4 percent and 17 percent respectively, what percentages of your money must be invested in risky asset and risk free asset, respectively, to form a portfolio with an expected return of 0.11?
6) Discuss how the CAPM might be used in capital budgeting decisions and utility rate decisions.
7) Stocks A and B have the following characteristics:
Stock Expected Return Standard Deviation
A 10% 5%
B 15% 10%
Correlation = -1
Assume that it is possible to borrow at the risk-free rate. What must be the value of the risk-free rate? (Hint: Think about constructing a risk-free portfolio from Stocks A and B and make use of the fact that the correlation is -1)
8) The index model for stock B has been estimated with the following result:
RB = 0.01 + 1.1RM + eB
If M=0.2 and R2B = 0.5 what is the standard deviation of the return on stock B?
9) Security A has a beta of 1.0 and an expected return of 12%. Security B has a beta of 0.75 and an expected return of 11%. The risk-free rate is 6 percent. Describe the arbitrage opportunity that exists; explain how an investor can take advantage of it. Give specific details about how to form the portfolio, what to buy and what to sell.
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Question related to risk
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Calculating annual cash flow
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Determine the beta of the firm
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Computation to find future value of stock
: Stock currently sells for 35.02 per share, market required rate of return is 17 percent, the beta is 0.10, ant risk free rate of return is 3.3 percent.
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Capital budgeting decisions and utility rate decisions
: If the expected returns for risk free asset and a risky asset are 4 percent and 17 percent respectively, what percentages of your money must be invested in risky asset and risk free asset, respectivel.
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Design of the software
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Multiple choice question on wacc
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Write an arm subroutine which allocate memory for new string
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