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Suppose that two stocks, A and B, and the market portfolio, M, have the following characteristics: Corr(A,M) = 0.8; Corr(B,M) = 0.6; ?2M = 0.1225; ?2A = 0.0784 and ?2B = 0.090. The total value of the portfolio is $2,000 of which 2/3 is invested in Stock B. [Note: Corr ( ) = Correlation coefficient]
A. Find the beta of the portfolio formed of A and B. Please show workB. Find the amount of Stock B's diversifiable risk. Please show work
Project A has average risk, B has below-average risk, C has above-average risk, and D has average risk. What is the firm's optimal capital budget when differential risk is considered?
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At the time these betas were developed, reasonable estimates for the risk-free rate, RF, and the required rate of return on the market, R(Rm), were 6.5 percent and 13.5 percent, respectively.
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Find out the future value of following annuities. The first payment in these annuities is made at the end of year one. That is, they're are ordinary annuities.
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