Portfolio of three stocks with total market value

Assignment Help Financial Management

Reference no: EM131930173

A portfolio of three stocks with total market value of $1,000,000 currently has a beta of 1.4. In light of an expected market downturn, you wish to reduce the portfolio beta to no more than 1.0. Two stocks are likely candidates for sale, one with a beta of 1.8 and a market value of $200,000 and the other with a beta of 1.5 and a market value of $250,000. Assuming that you could find one appropriate stock to replace these two, what should be its beta? (Show your work)

Reference no: EM131930173

Questions Cloud

What is the fixed-cost expenditure for firm : What is the fixed-cost expenditure for a firm with a DOL of 4.5 that generates pretax profits of $1 million and has $600,000 in depreciation expense?

Calculate weighted average cost of capital : Using the financial statements of any publicly traded company in 2017 calculate the Weighted Average Cost of Capital (WACC).

Total debt-to-equity ratio-what is Plasti-techs WACC : San Dimas Energy Inc. has total debt-to-equity ratio of 0.6. Currently, its debt has a pretax interest rate of 10%. what is Plasti-tech's WACC?

What is probability of booming economy occurring : What is the probability of a booming economy occurring if these are the only two economic states?

Portfolio of three stocks with total market value : A portfolio of three stocks with total market value of $1,000,000 currently has a beta of 1.4. In light of an expected market downturn,

What should be the beta of replacement stock : What should be the beta of a replacement stock if an investor wishes to achieve a portfolio beta of 1.2 by replacing stock C in the following equally weighted p

What is the project expected rate of return : A project has an assigned beta of 1.2, the risk-free rate is 3.8%, and the market rate of return is 11.2%. What is the project's expected rate of return?

Make the project acceptable : What is the minimum cash flow that could be received at the end of year 3 to make the following project "acceptable"?

Compute the after-tax two-year realized compound yield : What is the after-tax holding-period return on the bond? Use the tax rates in part (b) to compute the after-tax two-year realized compound yield.

User Account

All Pages