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A stock has a beta of 1.13 and an expected return of 12.1 percent. A risk-free asset currently earns 5 percent.
1. What is the expected return on a portfolio that is equally invested in the two assets?
2. If a portfolio of the two assets has a beta of .50, what are the portfolio weights?
3. If a portfolio of the two assets has an expected return of 10 percent, what is its beta?
4. If a portfolio of the two assets has a beta of 2.26, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain.
The Federal Reserve has decided that interest rates need to be increased to maintain low inflation in the economy. To accomplish this goal, the Fed has determined that the money supply needs to be decreased by $188 billion.
THe index closed at 14,539.14, which was up from the previous day's close of 14,455.28. What was the return (in percent to four decimal places) of the stock market for March 14, 2013
To finance the new venture two plans have been proposed. Plan A is an all common equity structure in which $2.3 million dollars would be raised by selling 86,000 shares of common stock.
The Yield To Maturity on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually see the bond before it matures, your realized return is known as the holding period yield (HPY).
Calculate the arithmetic average returns for large-company stocks and T-bills over this period. Calculate the observed risk premium in each year for the large-company stocks versus the T-bills.
Silas 4-Wheeler, Inc., has an ROE of 18.05 percent, equity multiplier of 1.60, and a profit margin of 18.80 percent. What is the total asset turnover and the capital intensity
Due to a recession, expected inflation this year is only 3.5%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 3.5%.
The target capital structure for Jowers Manufacturing is 53% common stock, 19% preferred stock, and 28% debt. If the cost of common equity for the firm is 20.4%, the cost of preferred stock is 11.2%,
describe the difference in economic profit between a competitive firm and a monopolist in both the short and long run. Which should take longer to reach long-run equilibrium.
The portfolio beta is 1.12. Now suppose you decided to sell one of the stocks in your portfolio with a beta of 1.0 for $7500 and use the proceeds to buy another stoc with beta of 1.75.
The expected lifetime of the various capital items is 10 years for the garbage trucks, 8 years for the bulldozer, 5 years for the lawn mowers, and 40 years for the activity center.
Harmony Company has current sales of $940,000. It has excess capacity in its assets in the amount of 22%. How much can Harmony Company grow to in sales without adding more assets
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