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A highly risk-averse investor is considering adding one additional stock to a 3-stock portfolio, to form a 4-stock portfolio. The three stocks currently held all have b = 1.0 and a perfect positive correlation with the market. Potential new Stocks A and B both have expected returns of 15%, and both are equally correlated with the market, with r = 0.75. However, Stock A's standard deviation of returns is 12% versus 8% for Stock B. Which stock should this investor add to his or her portfolio, or does the choice matter?
a. Either A or B, i.e., the investor should be indifferent between the two.b. Stock A.c. Stock B.d. Neither A nor B, as neither has a return sufficient to compensate for risk.e. Add A, since its beta must be lower.
Explain taxes, Leasing and the time value of money and explain why a financial lease represents a secured loan in which the lender entire debt service stream is taxable as ordinary income to the lessor/lender
In 1965, Warren Buffett get control of a New England textile business called Berkshire Hathaway for about $10 per share. Today the stock sells for around $135,000 a share and Mr. Buffett is the 2nd richest person in America.
What are some present trends in retailing? How have changing demographics, such as the aging population and changes in family structure, affected retail trends?
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Multiple choice questions on cash, fund management ans bond valuation - Which of the following is not one of the components that makes up the required rate of return on a bond
The financial manager of a company determines the following schedules of cost of debt and cost of equity for various combinations of debt financing:
Stinging Pesticides, corporation, provides scorpion control services, to residential and business customers in the El Paso area. The corporation recently raised its service price from $70 to $80 per yearly treatment.
Discuss on opening the mine now or one year later using NPV analysis and What is the NPV of opening the mine now
The treasurer of Harmon Bottling Corporation currently has $100,000 invested in preferred stock yielding 9 percent. He appreciates tax advantages of preferred stock and is planning buying $100,000 more with borrowed funds.
Determine the horizon value at 2016 if growth from 2015 remains constant.
Why are bonds preferable to the traditional bank loan from viewpoint of dilution, amount to be borrowed, and threat of bankruptcy?
J & B Inc. has $5 million of new debt to finance a project with a coupon rate of 12 percent, paid semiannually and has a par value of $1,000. The bonds will mature in 14 years and are priced at $850,
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