In portfolio construction

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Reference no: EM132068913

1. In Portfolio Construction, which of the following are correct

The investments constitute a portfolio.

The composition of a portfolio depends on investment goals.

Not all assets are appropriate for all financial goals.

Income is not spent or savings are invested

All are true statements

None are true statements

2. An annual coupon bond pays coupon payments of $100, has a par value of $1000,matures in 10 years, and has a yield to maturity of 11%. The current yield on this bond is ___.

A.11.94%. B.10.63% C.12.64%. D.11.27%

3. You purchased land 3 years ago for $75,000 and believe its market value is now $120,000. You are considering building a hotel on this land instead of selling it. To build the hotel, it will initially cost you $205,000, an expense that you plan to depreciate straight line over the next three years. Wells Fargo offered you a loan for $60,000 at an 8% interest rate to be repaid over the next 4 years. You anticipate that the hotel will earn revenues of $334,000 each year, while expenses will be a mere $75,000 each year. The initial working capital requirement will be $14,000 which will be recovered in the last year. The tax rate is 28%. Your estimated cost of capital is 15%. What is the net present value of this project?

$139,666.75

$80,929.67

$831,000.00

$186,089.94

$192,149.88

Reference no: EM132068913

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