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The risk-free rate of interest is 5%. Stock ABC has a beta of 1.4. The expected return on the market portfolio is 12%. Assume CAPM holds. (note: the questions below are independent, not sequential.) a. Plot the security market line in expected return, beta space. Label all axes and the points representing the expected return for the market portfolio, the expected return for stock ABC, and the risk free rate. Be sure that you note the expected return and beta for all of these points. See attached graph b. What is the expected return of a portfolio that has a 40% investment in the risk free asset and an 60% investment in stock ABC? 10.88 – see attached c. If a portfolio of these two assets (the risk-free asset and stock ABC) has a beta of .6, what are the portfolio weights (i.e. what percent of the total portfolio is invested in each asset)? 43% stocks, 57% risk free. d. If a portfolio of the two assets (the risk-free asset and stock ABC) has an expected return of 14%, what is the portfolio's beta? 1.2 see attached e. If a portfolio of the two assets (the risk-free asset and stock ABC) has a beta of 2.0, what are the portfolio weights? How do we interpret the weight for the risk-free asset? 142% Stock, -42% Risk free. Investor will borrow at the risk free rate and buy on margin.
what is the amount of his new annual payment?
Mitts Cosmetics Co.'s stock price is $50.30, and it recently paid a $2.25 dividend. This dividend is expected to grow by 25% for the next 3 years, then grow forever at a constant rate, g; and rs = 13%. At what constant rate is the stock expected to g..
Which of the following can cause a bond investor to lose money? When choosing an investment, it is not necessary to consider the risk factor. During inflationary times, there is a risk that the financial return on an investment will not keep pace wit..
What is the amount of total assets of Kirk Corporation at the end of the month?
Jasper Fern, age 62, works full time and maintains two traditional IRA accounts. On March 23 of the current year, he withdraws $6,500 form one of his IRA accounts. The account is funded only with $6,500 nondeductible contributions. Its balance is $2,..
Dozier Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years,
You’ve observed the following returns on Doyscher Corporation’s stock over the past five years: –24.6 percent, 13.4 percent, 29.8 percent, 2.2 percent, and 21.2 percent. The average inflation rate over this period was 3.22 percent and the average T-b..
What is the present value of a 6-year annuity of $2,250 per period in which payments come at the beginning of each period? The interest rate is 10 percent. Use Appendix D for an approximate answer, but calculate your final answer using the formula an..
RAK Corp. is evaluating a project with the following cash flows: Year Cash Flow 0 –$ 28,000 1 10,200 2 12,900 3 14,800 4 11,900 5 – 8,400 The company uses a discount rate of 13 percent and a reinvestment rate of 6 percent on all of its projects.
use the? dividend-discount model to estimate its value per share at the end of 2009. The price per share is $---------- . (Round to the nearest? cent.)
What is the book value for the vehicle at the end of year 7, if this is a 7 year MACRS property?
An asset was purchased three years ago for $100,000 and can be sold for $40,000 today. The asset has been depreciated using the MACRS 5-year recovery period and the firm pays 40% taxes on both ordinary income and capital gain. SHOWING WORK- Compute t..
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