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-Draw an ideal SML. Based on the early empirical results, what did the actual risk-return relationship look like relative to the ideal relationship implied by the CAMP?
-Given are states, probabilities, and returns of two securities A and B. Consider the returns of these securities which rely on the states of nature as given below: Returns %
State of nature Probability A B
Recession 0.3 10 5
Stable 0.4 15 7.5
Expansion 0.3 10 5
Use the above given data to:
a) Estimate the expected returns of A and B.
b) Compute the standard deviation of the individual securities
c) Find out the correlation coefficient between the two securities returns and comment.
d) Work out the portfolios expected return for a portfolio consisting of 60% of A and 40% of B.
e) Evaluate the risk of the portfolio in (d) above.
If you were a finance leader in a business organization, how would you apply the concept of risk and return
XYZ, Inc. has an offer to buy ABC & Sons. XYZ thinks ABC can produce cash flows of $5k, $9k, & $15k over the next three years (respectively).
The current risk free rate of interest is stated at 5% per annum. Royal plc shares have a beta of 1.2 and an expected return of 14% per annum. Assume that the C
Compute the expected exchange rate in one year and use it to compute the amount of dollars you must pay in one year. (A) $851,700 (B) $867,000 (C) $782,750 (D)$850,000
IBM's stock's beta is 1.5, T-bill rate is 1% and the market portfolio's expected return is 5%. What is IBM's expected return? (Show steps)
DISCOUNTING THE MARLBORO MAN
What is the estimated value of Bond X using matrix pricing? What is the 18-month spot rate? What discount margin is reflected in the FRN's price?
If you deposit $16,500 at the Elmhurst Savings Bank on the last day of each year, and all accumulations earn 5.4% interest compounded annually
If it's marginal tax rate was 30%, what were Timber's cash flows from operating activities for 2010?
Suppose that your firm has a cost of equity of 18% and a cost of debt of 8%. If the target debt/equity ratio is .6, and the tax rate is 35%, what is the firm's weighted average cost of capital (WACC)? Shown work would be very appreciated if possib..
The firm is in stable growth, growing 3% a year and has a cost of equity of 18%. Estimate the return on equity for Dylan Inc., assuming that the firm is correctly priced at the moment.
Determine your sampling technique. Determine your target sample size based on costs, time, precision, and the desire to reduce possible sampling error.
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