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a) Consider two risky assets (X and Y) that have a standard deviation of 25% and 18% respectively. Compute the variances and standard deviations of portfolio returns for an equal weighted portfolio of the two assets when their correlation of return is: i) Ρxy = 1.00, ii) Ρxy = 0.50, iii) Ρxy = 0, iv) Ρxy= -0.50 b) The table below contains information based on an analyst's forecasts for three stocks. The risk free rate is 8% and the market return is 16%. Stock Current stock price(ksh) Exptd stock price(ksh) Expectd dividend(ksh) Beta
p 25 27 1 1
Q 40 45 2 0.8
R 15 17 0.5 1.2
Required
i) Compute the expected return on each stock
ii) Compute the required return on each stock
iii) Determine whether each stock is undervalued, overvalued or correctly valued
iv) Outline an appropriate trading strategy
v) What are the limitations of the capital asset pricing model when used to make investment decisions
Illustrate out the direct and indirect costs of bankruptcy. In brief explain each.
mary wants to invest her recent bonus in an eight-year 10 percent coupon bond that pays semiannual coupon payments. the
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What is the required rate of return on a preferred stock with a $50 par value, a stated dividend of 10% of par, and a current market price of (a) $54, (b) $89, (c) $101, and (d) $132 (assume the market is in equilibrium with the required return eq..
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.29 million.
You have recently graduated from the University of North Georgia with a BBA degree, and you have taken a job with a local manufacturing company
1.what are divarsquos projected profits for the fiscal year ending september 1995?2.what factors affect a firmrsquos
What does the NPV become if the tax rate falls to 35%? Round your answer to three decimal places.$ million
If your cost of money is 4.9 percent, what is the current value of the lease?
Use the black-scholes model to calculate the maximum bid that the company should be willing to make at the auction.
Explain how agency problems may lead to non value-maximizing motives for mergers.
The First Bank of Ellicott City has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of $1.65 on this stock. What is the current price of this preferred stock given a required rate of return of 14.5 percen..
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