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You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 12.9 percent. If Stock X has an expected return of 11.2 percent and a beta of 1.30, and Stock Y has an expected return of 7.7 percent and a beta of .8, how much money will you invest in Stock Y? How do you interpret your answer? What is the beta of your portfolio?
Two-state put option value: S0=100, X=115; 1+r=1.10. The two possibilities for S(T) are 125 and 85. what is the hedge ratio of the put? given that the stock currently is selling at 100, compute the value of the put option.
Sally McKrachen is a single young professional with a gross income of $51,000. Sally has no adjustments to gross income, but she does have itemized deductions totaling $4,275. If personal exemptions for the year are $3,700 each and the standard deduc..
Six months ago, you purchased 1,200 shares of ABC stock for $21.30 a share. You have received dividend payments equal to $.60 a share. Today, you sold all of your shares for $22.70 a share. What is your total dollar return on this investment? What is..
CAR Inc. will be liquidated in one year. The value of CAR’s assets is currently $650 million, and next year it will be either $825 million or $400 million. Before shareholders can be paid next year, CAR will have to repay $500 million of debt. What i..
Long-Term Financing: As was mentioned in the chapter, new equity issues are generally only a small portion of all new issues. At the same time, companies continue to issue new debt. Why do companies tend to issue little new equity but continue to iss..
A 15-year annuity pays $1,900 per month, and payments are made at the end of each month. If the interest rate is 10 percent compounded monthly for the first seven years, and 6 percent compounded monthly thereafter, what is the present value of the an..
If the pure expectations theory is correct (that is, the maturity risk premium is zero), which of the following is CORRECT? An upward-sloping Treasury yield curve means that the market expects interest rates to decline in the future. A 5-year T-bond ..
Audrey Sanborn has just arranged to purchase a $530,000 vacation home in the Bahamas with a 20 percent down payment. The mortgage has a 5.9 percent APR, compounded monthly, and calls for equal monthly payments over the next 30 years. How much will Au..
List at least five human capital management problems at AGC. Leadership styles and their impact on organizational cultures. How will you measure the effectiveness of the plan?
Summerdahl Resorts' common stock is currently trading at $23.00 per share. The stock is expected to pay a dividend of $1.75 a share at the end of the year (D1 = $1.75), and the dividend is expected to grow at a constant rate of 3% a year. What is the..
A corporation receives 35,000 in dividend income If it is in the 34% marginal bracket, the tax on the dividend income alone generally amounts to
Smith Technologies is expected to generate $50 million in free cash flow next year, and FCF is expected to grow at a constant rate of 6% per year indefinitely. Smith has no debt or preferred stock, and its WACC is 15%. If Smith has 40 million shares ..
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