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Dumb Beta Strategy and Sharpe ratio
Two mutual funds, fund A has a beta of 1.5, fund B has a beta of 0.5, unchanged regardless of market condition. Assuming expected returns follow the CAPM model.
(1) Does fund A always have higher return than fund B?
(2) Which fund has higher Sharpe Ratio?
Porter Inc's stock has an expected return of 12.25%, a beta of 1.25, and is in equilibrium. If the risk-free rate is 5.00%, what is the market risk premium?
You are given the following information for Gandolfino Pizza Co.: sales = $51,000; costs = $21,700; addition to retained earnings = $10,250; dividends paid = $800; interest expense = $4,100; tax rate = 35 percent. Calculate the depreciation expense.
A customer has a large sailing yacht on a vessel that your company will be discharging. The customer is present and is watching the off-loading operation. The five stevedores you manage pull off a very tricky maneuver, safely transferring the yacht t..
You own 1,000 shares of stock in Avondale Corporation. You will receive a $0.80 per share dividend in one year. In two years, Avondale will pay a liquidating dividend of $35 per share. The required return on Avondale stock is 16 percent. You only wan..
Felicia & Fred are considering the introduction of a new product line of jewelry featuring crystals imported from the Czech Republic. The manufacturing plant offers crystals in all colors, sizes, and shapes cut to the design specifications of their c..
New World Corp. and Old World Corp. are identical in all respects except capital structure. New World's bonds have a market value of $200 million while Old World's bonds have a market value of $500 million. If the stock price for New World is $120, ..
Scott Investors, Inc. is considering the purchase of a $360,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method. The market value of the computer will be $60,000 in f..
As an overall review of this chapter, identify possible reasons for growth in international business. Then, list the various disadvantages that may discourage international business.
What is the future value of $1,140 a year for 5 years at a 7 percent rate of interest?
In each of the following cases, calculate the accounting break-even and the cash break-even points. Ignore any tax effects in calculating the cash break-even.
Knight Roundtable Co. has annual credit sales of $576,000 and an average collection period of 35 days in 2008. What is the company’s average accounts receivable balance?
Suppose the real risk free rate and inflation rate are expected to remain at their current levels throughout the forceseeable future. Consider all factors that affect the yield curve. then identify which of the following shapes that us treasury yield..
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