How much money should she invest in each stock

Assignment Help Financial Management

Reference no: EM132019571

Suppose that there are only three stocks in the market: Jazz, Inc., Classical, Inc., and Rock, Inc. Their outstanding shares and prices are shown in the table below. The risk-free rate is 2%. Assume that the market is efficient.

Security	Outstanding Shares (03.)	Price	Cap = O.S. * Price	Weight
Jazz Inc.	10,000	$6.00	$60,000	3/20
Classical Inc.	30,000	$4.00	$120,000	3/10
Rock, Inc.	40,000	$5.50	$220,000	11/20

Suppose that the expected returns of Jazz, Classical, and Rock are 10%, 6%, and 12%, respectively.

An investor who has $10,000 wants to achieve an expected return of 40%.How much money should she invest in each stock and the risk-free security?

Reference no: EM132019571

Questions Cloud

What was the dividend yield and the capital gains yield : Suppose a stock had an initial price of $56 per share, paid a dividend of $1.60 per share during the year, and had an ending share price of $66.

Construct a portfolio with positive weights : Construct a portfolio with positive weights in both stocks and that has the same volatility as MEX alone.

Is the yen expected to get stronger or weaker : What would you estimate is the difference between the inflation rates of the United States and Japan?

What is the todays value of swap to financial institution : The current exchange rate is 0.62USD/AUD. In a swap agreement, a financial institution pays 8% per annum in AUD and receives 4% per annum is USD.

How much money should she invest in each stock : An investor who has $10,000 wants to achieve an expected return of 40%.How much money should she invest in each stock and the risk-free security?

Determine the bonds yield to maturity is : Suppose a ten-year, $1,000 bond with an 8.9% coupon rate and semiannual coupons is trading for $1, 034.23.

The difference between the inflation rates : What would you estimate is the difference between the inflation rates of the United States and Japan?

Develop the macrs deductions folllowed by switching : Develop the MACRS deductions (assuming a 200% declining-balance rate), followed by switching to straight-line with the half-year convention.

Estimate the semiannual default probabilities assuming : Estimate the semiannual default probabilities assuming the unconditional default probabilities are the same on each possible default date.

User Account

All Pages