User Account

All Pages

Investor can borrow or lend freely at risk-free asset

Assignment Help Financial Management
Reference no: EM131904258

Suppose there are N risky assets and one risk free asset. Every investor can borrow or lend freely at the risk-free asset. Suppose further that every investor has homogeneous expectation on stock returns. In this case, explain briefly why the tangency portfolio should be the market portfolio. Market portfolio is defined as the weighted average of individual stock returns. The weight of each stock in this portfolio is defined as the market capitalization of the firm over the total market capitalization of all stocks.

Reference no: EM131904258

Questions Cloud

Motives for mergers lead to benefits for society : Some of the motives for mergers lead to benefits for society,
Create portfolio with zero standard deviation : How to mix these two assets to create a portfolio with zero standard deviation?
Should he cash the cd or use the? in-store financing : Antonio would like to replace his golf clubs with a custom measured set. Should he cash the CD or use the? in-store financing?? Why?
Discuss opportunity cost concept as strategic construst : Explain and discuss the ‘opportunity cost’ concept as a strategic construct.
Investor can borrow or lend freely at risk-free asset : Suppose there are N risky assets and one risk free asset. Every investor can borrow or lend freely at the risk-free asset.
Statement of retained earnings night scapes : Statement of Retained Earnings Night Scapes, Corp. began the year 2008 with $12 million in retained earnings.
Weight used for equity in computation : what would be the weight used for equity in the computation of Town Crier's WACC?
Right to drill for crude oil on large piece of land in one : Frodo-Neo Company is currently evaluating the right to drill for crude oil on a large piece of land in one year.
Bank charging video for underwriting the stock issue : What percentage of the gross price is the investment bank charging Video for underwriting the stock issue?

Reviews

Write a Review

Financial Management Questions & Answers

  Calculate the annual depreciation allowances

Calculate the annual depreciation allowances and end-of-the-year book values for this equipment.

  Compute the duration of the liabilities

Compute the duration of the liabilities. Compute the duration of the (net) market value of the bank.

  The after-tax yield on the company bonds

Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D, with average betas for each division of 0.8, 1.0, 1.5, and 1.7, respectively. Assume all current and future proje..

  What time period are your numbers from

Broadly speaking, what was the average risk of cash, bonds, and stocks? - What time period are your numbers from?

  Why are options on bond futures more actively traded

Explain the difference between a call option on yen and a call option on yen futures. -  Why are options on bond futures more actively traded than options on bonds?

  What transactions or events change owners equity

What transactions or events change owners' equity? What are examples of changes within owners' equity that do not change the total amount of owners' equity?

  Increase the probability of bankruptcy by what percentage

If Ralston has debt due of $80 million in one year, the CEO's decision will increase the probability of bankruptcy by what percentage?

  Calculate annual coupon interest payments

All bonds have some common characteristics, but they do not always have the same contractual features. Differences in contractual provisions, and in the underlying strength of the companies backing the bonds, lead to major differences in bonds risks,..

  Prepare simple balanced scorecard with strategic objective

Mark Hopper owns Dane Champions, a dog kennel that raises champion Great Danes for showing and breeding. His vision is to be the best-known breeder of Great Danes globally. Is the company’s strategy one of cost leadership or product differentiation? ..

  Using spot and forward exchange rates

Using spot and forward exchange rates: The spot exchange rate for the Canadian dollar (CAD) is 1.14 CAD and the six-month forward rate is 1.17 CAD. Calculate whether a U.S. dollar (USD) or a Canadian dollar is worth more.

  Under which model is the cost of capital for azt likely

Suppose AZT is a small value stock and that you use both the CAPM and the Fama-French model to compute its cost of capital. Under which model is the cost of capital for AZT likely to be higher?

  Create a portfolio of analytical reference materials

Create a portfolio of analytical reference materials including the financial reports for at least five years. This is your analytical permanent file for the selected company.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd