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Greta has a risk aversion of A=3 when applied to return on wealth over a one year horizon. The S&P risk premium is estimated at 8.4% per year with a SD of 23.4%. The hedge fund risk premium is estimated at 13.4% with a SD of 38,4%. The returns on these portfolios in any particular year are uncorrerelated wth it’s own returns in any other years. They are also uncorrelated with the returns of the other portfolio in other years. The hedge fund claims correlation coefficient between the annual returns on the S&P and the hedge fund in the same year is zero. Assuming the correlation between the annual returns on the two portfolios is .3 what would be the optimal asset allocation? Round to 4 places. What is the expected return on the portfolio? Round to 4 places and please show your work.
Simms Corp. is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC or negative, in both cases it will be rejected.
Assume that in January 2014, the average house price in a particular area was $274482. What was the annual percentage increase in selling price?
Luis has $120,000 in his retirement account at his present company. Because he is assuming a position with another company, Luis is planning to "roll over" his assets to a new account. Luis also plans to put $3000/quarter into the new account until h..
Geiger Corp. has a beta of 1.3 and the expected return based on the current stock price is 12%.
Selected yearend financial statements of Cabot Corporation follow, all sales were on credit selected balance sheet amounts at December 31, 2012 were inventory; $52,900; total assets; 229,00; common stock 105,000 and retains earning 52, 548.
Project L costs $55,000, its expected cash inflows are $11,000 per year for 12 years, and its WACC is 9%. What is project's NPV.
Recall that in this course interest rates are always quoted on an annual basis unless otherwise specified. What is the discount rate d(0,2)?
Barbarita’s Linens want to expand into the store next door to set up a Baby Supply Store. She needs $150,000 for the build out and new inventory of the project. How much will the expansion of Barbarita’s Baby Supply Store need to sell in dollars and ..
A manufacturer of automobile headlamps tests 400 samples each day. The non-conformities are counted as scratches, circuit breaks etc. These defects are corrected before sending the headlamps to customers. Given the following information, create and g..
Which one of the following statements is correct in relation to independent projects?
Suppose we are going to invest in a sequence of zero coupon-bonds so that our final payout is $1000. This means our investment gets compounded. Often, when we quote interest rates we fail to mention the compounding. That can make a bit of a differenc..
COLLAPSE From the standpoint of the borrower; is long term or short term credit riskier? Would it ever make sense to borrow on a short term basis if short term rates were above long term rates?
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