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Your sister is considering to add one additional stock to a three stock portfolio, to form a four stock portfolio. The three stocks currently held all have b=1.0, and they are perfectly positively correlated with the market. Potential new stocks A and B both have expected returns of 15%, are in equilibrium, and are equally correlated with the market, with r=0.75. However, stock A's standard deviation of returns is 12% versus 8% for stock B. Why should i add additional stock to my sister's portfolio?
What are the linkages among financial decisions, return, risk and stock value? Why are these linkages important? How does the financial manager incorporate these as s/he manages the assets and liabilities of the firm? Be sure to include examples to p..
You inherit $220,000 and decide to invest it for 28 days compounded daily at 6% annual interest. After the 28 days, you are going to invest your new found money in a start-up business. How much interest is earned on this investment? How much money wi..
Determine the sample size needed to detect an increase of 5 points. Let alpha = 0.02 and beta = 0.05. Calculate the sample size
Mr. Smith constructed a building at a cost of $80,000 on land that he leases. He uses half of the building for business purposes and lives in the other half. In the current year, a flood damaged the entire building. Cost of building $80,000 Depreciat..
Suppose you purchase five put contracts on Test burger Co. The strike price is $45, and the premium is $3. If, at expiration, the stock is selling for $39 per share, what are your put options worth? What's your net profit?
Suppose you buy both a European put and call options on the same security with both options is expiring in 6 months and both having strike price equal to the initial value of the security. Under what condition this is a reasonable investment?
Andrusco Corp's new vice president of Finance, Mr Rufus, has discovered that a production machine authorized for purchase last year y his fired predecessor Mr. Miranda, is not functioning well on the production floor. Therefore he has decided and rec..
Assume that all interest rates in the economy decline from 10% to 9%. Which of the following bonds would have the LARGEST percentage increase in price?
What is the initial margin requirement in October 2004 and is the company subject to anymargin calls and what is the impact of the strategy you propose on the price the company pays for copper?
Assume that you are a consultant to Tintle Inc., and you have been provided with the following data: D1 = $0.81; P0 = $23.43; g = 4.00% (constant). What is the cost of common equity from retained earnings based on the DCF approach?
You believe that the Non-stick Gum Factory will pay a dividend of $3 on its common stock next year. Thereafter, you expect dividends to grow at a rate of 2% a year in perpetuity. If you require a return of 12% on your investment, how much should you ..
The Wendt Corporation had $11.5 million of taxable income. What is the company's federal income tax bill for the year? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.
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