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A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 3.0%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 12% 41% Bond fund (B) 5% 30% The correlation between the fund returns is .0667. What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Expected return %
Standard deviation %
You have won the Florida state lottery. Lottery officials offer you the choice of the following alternative payments. What is the value of an investment that pays $100 every year forever with the first cash flow occurring in one year? What would the ..
A new computer server costs $860,000, delivered and installed. Annual operating costs are $32,000. A five year life is expected with no anticipated value thereafter. Given a required rate of return of 12%, what is the equivalent annual cost of the se..
You are planning to make annual deposits of $5,850 into a retirement account that pays 8 percent interest compounded monthly. How large will your account balance be in 25 years? What is the Future Value?
Capital gains taxes Perkins Manufacturing is considering the sale of two nondepreciable assets, X and Y. Asset X was purchased for $2,000 and will be sold today for $2,250. Asset Y was purchased for $30,000 and will be sold today for $35,000. The fir..
An online buying club offers a membership for $300 for which you will receive a 10 percent discount on all brand name items you purchase. How much would you have to buy to cover the cost of the membership?
An arbitrager at Deutsche Bank notices that the yield on Brazilian Real 6-month risk-free bills is 5.5% per annum and the yield on U.S. 6-month T-bills is 7% per annum. What transactions will the arbitrageur undertake to realize arbitrage profits in ..
You borrow $100,000 at an interest rate of 12% compounded semi annually on January 1st, 2005. The loan terminates on December 31st, 2008. The loan terms call for interest payments every six months (at the end of each period) for the next 3 years and ..
A project has the following cash flows: Year Cash Flow 0 $ 40,500 1 – 19,500 2 – 30,500 What is the IRR for this project? (Round your answer to 2 decimal places. (e.g., 32.16)) IRR % What is the NPV of this project, if the required return is 10 perce..
Describe the firms economic environment and evaluate how this has impacted historic firm performance and is likely relevant to future performance and Identify the key success factors and risks of the firm's strategy and the sustainability of profi..
X and Y have original investments of $54,835 and $109,033 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $..
You find that the bid and ask prices for a stock are $13.75 and $15.05, respectively. If you purchase or sell the stock, you must pay a flat commission of $20. If you buy 300 shares of the stock and immediately sell them. What is your total implied a..
Great Seneca Inc. sells $100 million worth of 20-year to maturity 13.12% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $981 for each $1,000 bond. The firm's marginal tax rate is 40%. What is the after-tax cost of capital ..
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