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Determine the expected return and risk of a portfolio made up of 70 per cent of security X and 30 per cent of security Y if the correlation coefficient for the returns on X and Y is +0.2 Security Expected Return Standard Deviation of Return
X 12 per cent 15 per cent
Y 18 per cent 22 per cent
ii. Explain briefly why the risk of the portfolio specified above is below the weighted average of the risk of securities of X and Y.
b) Explain how increasing the number of securities in a portfolio is likely to reduce the risk of the portfolio but it is unlikely to eliminate all of the risk.
Kendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 5%. The company's weighted average cost of c..
ABC Co. and XYZ Co. are identical firms in all respects except for their capital structure. ABC is all equity financed with $625,000 in stock. XYZ uses both stock and perpetual debt; its stock is worth $312,500 and the interest rate on its debt is 5...
The returns on the common stock of a particular company are quite cyclical. In a boom economy, the stock is expected to return 32% in comparison to 14% in a normal economy and a negative 28% in a recessionary period. The probability of a recession is..
What was the average annual growth rate of dividends for this firm?
Use the following information to prepare a trial balance. (Leave no cells blank - be certain to enter "0" wherever required. The items in the Trial Balance should be grouped as follows: Assets, Liabilities, Equity, Dividends, Revenues, and Expenses.
If the regular semi-annual loan payment is 4,250 dollars, then what is the EAR of the loan?
Compute the NPV and IRR of each project and rank the investments from best to worst under each method. - Compute the PVI for each project and rank the alternatives.
A municipal bond you are considering as an investment currently pays a 6.81 percent annual rate of return. Calculate the tax equivalent rate of return if your marginal tax rate is 28 percent. Calculate the tax equivalent rate of return if your margin..
Charlie's Cycles Inc. has $90 million in sales. The company expects that its sales will increase 7% this year. Charlie's CFO uses a simple linear regression to forecast the company's inventory level for a given level of projected sales. What are your..
Purple Dalia Inc, has the following balance sheet statement items, What is the firm's total stockholder income?
What happens to the bond's yield to maturity if the bond matures in 28 years? What if it matures in 7 years? (Round to two decimal places.)
Ben Lieber is a waiter at Harbor House, where he receives a weekly wage of $80 plus tips for a 40-hour workweek. Lieber's weekly tips usually range from $280 to $400. Under the Fair Labor Standards Act, the minimum amount of wages that Lieber must re..
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