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A stock has a beta of 19.5 and an expected return of 12%. A risk free asset currently earns 3.8%. (please show your calculation and formula used,)
a) What is the expected return on a portfolio that is equally invested in the two assets?
b) If portfolio of the two assets has a beta of .78, what are the portfolio weights?
c) If the portfolio of the two assets has an expected return of 10%, what is its beta?
d) Ifa portfolio of the two assets has a beta of 3.9, what are the portfolio weights?
During the Great Recession of 2008-2009, corporate cash conversion cycles typically increased in length by a significant amount. Why might this have occurred? Was it a good decision by corporate CFOs to allow this to happen? Explain
Nonconstant growth Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $2.00 comin..
Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for S989.89. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is $1,024.25, what is the yield that Trevor would earn by sell..
The total book value of the firm’s equity is $17 million; book value per share is $34. The stock sells for a price of $45 per share, and the cost of equity is 15%. The firm’s bonds have a face value of $6 million and sell at a price of 120% of face v..
A TV pundit claims that a proportional income tax does not satisfy horizontal equity, because it places different burdens on individuals with the same lifetime income:
You buy 600 shares of stock at a price of $86 and an initial margin of 75 percent. If the maintenance margin is 40 percent, at what price will you receive a margin call?
The maintaining of a good reputation of the profession is fundamental to the ability of the profession to continue to enjoy its current rights and privileges.
If interest rates increase 3 percent and the average duration of a bank’s $100 million of assets is 4 years, the value of those assets will fall:
A basic interest rate swap is priced as a zero net present value transaction. Explain what this means. Use the two year swap data to demonstrate your argument.
You manage an equity fund with an expected risk premium of 11.2% and a standard deviation of 26%. The rate on Treasury bills is 4.2%. Your client chooses to invest $70,000 of her portfolio in your equity fund and $30,000 in a T-bill money market fund..
Supposed that Volkswagen plans to import 250 Golfs from its plant in Dresden, Germany, to rebadge them as "CTS" and sell them in the US via their dealerships. Explain how Volkswagen can use currency futures to hedge its exchange risk. How many future..
Prepare a WAC IO and PO tranche to give a 5.75% deal coupon. Create a PAC class (A-1) with an initial collar of 50%-200% PPC, assuming base case defaults.
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