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Stock A has expected return of 13% and standard deviation of 20%. Stock B has expected return of 5% and standard deviation of 4%. The correlation of returns between the two stocks is 0.65.
You have put all of your money into these two stocks. Graph your expected return, and the standard deviation of your returns, as a function of your investment weight in A (w) as w runs from -2 to 2.
So you want a graph with expected return on the y-axis and standard deviation on the x-axis.
You own two risky assets, both of which plot on the SML. Asset A has an expected return of 12.37% and a beta of 1.40. Asset B has an expected return of 14.13% and a beta of 1.65. If your portfolio beta is the same as the market portfolio, what propor..
Engineers at a national research laboratory built a prototype automobile that could be driven 180 miles on a single gallon of gasoline. They estimated that in mass production the car would cost $40,000 per unit to build. In your opinion, is energy ef..
If Sanchez declares and pays a 100 percent stock dividend and then pays an annual cash dividend of $1.10 per share, what is the effective rate by which the dividend has been increased?
Your group has been assigned task of determining what value to place on call option for your firm. The current stock price per share is $54.52. Six months from now management believes the stock price will either fall by 25% or rise by 33%. Using opti..
How long will it take you to pay back the loan? What is the effective annual rate on the loan?
Colins Company current return on equity (ROE) is 16%. It pays out one-quarter of earnings as cash dividends. Current book value per share is $35. The company has 5 million shares outstanding. What is the terminal value? What is the current value of C..
Using fair value accounting for goodwill, under FAS 141R, determine the amount of Goodwill that "the acquiring company" enters on its balance sheet in the following situation: Oxford Corporation is acquiring the target Bickley, Inc. in a merger. Both..
Sanborn Corp. is comparing two different capital structures. Plan 1 would result in 3,100 shares of stock and $23,160 in debt. Plan II would result in 2,500 shares of stock and $46,320 in det. The interest rate on the debt is 7 percent. In part (a), ..
Your firm is contemplating the purchase of a new $1,628,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $158,400 at the end of that time. The net working capital will ..
If the discount rate is 15%, what is the present value of this investment? Enter your answer in dollars, rounded to the nearest cent.
What is the NPV of the shopping mall? What is the IRR of the shopping mall?
At what volume of byproduct sales would Fosbeck have a break-even NPV=0?
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