User Account

All Pages

Possible combinations between s and b

Assignment Help Finance Basics
Reference no: EM133056572

You are interested in making investment in S and B. The risk-free rate of return is 6% and the market risk premium is 7%. The expected return of S is 25%, the expected return of B is 20%. The standard deviation of S is 9.22% and the standard deviation of B is 5%

States

Probabilities

S

B

1

0.4

25%

15%

2

0.3

35%

20%

3

0.2

15%

25%

4

0.1

15%

30%

Required: ( don't used excel, show step please and formula )

  1. Compute and analyze the correlation between S and B round your answer to 2 decimals allocate to S and B?
  2. Compute the expected return and risk of the minimum variance portfolio
  3. How do you call the curve representing all the possible combinations between S and B?
  4. Explain with you own words how to draw this graph? If you would like to create the optimal portfolio.
  5. Explain with your own words how to find out graphically the optimal portfolio
  6. Compute how much weight you will allocate to S and B in the optimal portfolio
  7. Compute the expected return and risk of the optimal portfolio (2 Marks) The beta of the stock S is 0.5 while the beta of the stock B is 2:
  8. Indicate for each stock S and B whether it's overpriced, underpriced or fairly priced and explain the reason

Reference no: EM133056572

Questions Cloud

What is the expected payoff of bank loans : Consider two local banks. Bank A has 84 loans outstanding, each for $1 million, that it expects will be repaid today. Each loan has a 4% probability of default,
Researching few small business administration loan awards : After reviewing relevant areas of the U.S. Small Business Administration website and researching a few Small Business Administration (SBA) Loan awards via the w
What is the horizon value of the interest tax shield : Wilde Software Development has a 10% unlevered cost of equity. Wilde forecasts the following interest expenses, which are expected to grow at a constant 3% rate
Explain the concept of goodwill and its treatment : Explain the concept of Goodwill and its treatment on admission of a new partner. In addition, examine critically the issue raised by the senior partner
Possible combinations between s and b : The expected return of S is 25%, the expected return of B is 20%. The standard deviation of S is 9.22% and the standard deviation of B is 5%
Different department team members : Pick 2 different department team members and describe why they were chosen and what skill they should bring.
Where will this loan appear in the balance sheet : During the financial year to 31st December 2020, Glaxo borrowed £50m from Phizers, Where will this loan appear in the balance sheet
Different objectives or different resumes : When should an applicant use different objectives or different resumes? Why is it essential to use power words and keywords in a resume?
Construct a bond portfolio : Construct a bond portfolio consisting of 3 bonds that would immunize the firm from interest rate risk in 7 years and maximize the convexity.

Reviews

Write a Review

Finance Basics Questions & Answers

  If the firm has revenues of 15090 operating expenses of

1. if a firm has an accounts receivable balance of 18800 at the end of 2007 and 16500 at the end of 2008 which of the

  Determine the initial margin-maintenance margin

Determine the initial margin, maintenance margin, and the amount of replenishment if the price of Pyera stock changes to (a) Tk.38.00, (b) Tk.48.00, and © Tk.52

  Computation of duration of assets and liabilities

Calculate the duration of the assets.

  A convertible bond has face value of 1000 and conversion

a convertible bond has a face value of 1000 and the conversion price is 60 per share. the stock is selling at 25 per

  Olympic sports has two issues of debt outstanding

Olympic Sports has two issues of debt outstanding. One is a 6% coupon bond with a face value of $28 million, a maturity of 15 years, and a yield to maturity of 7%. The coupons are paid annually. The other bond issue has a maturity of 20 years, with c..

  What is an acceptable quoted rate

If you want an effective rate of  5%, what is an acceptable quoted rate if money is compounded monthly?

  Determining the value of the project

Crimson inc. is planning to expand its operations in the fish-farming industry. The company needs to raise $30 million in new equity to buy fixed assets.

  What is the return on investment

What is the return on investment if the borrower expects to remain in the home for the next fifteen years?

  Project authorisation for a project of moderate complexity

Describe the typical processes involved in project authorisation for a project of moderate complexity, including the role and position of the authorising person

  Annual coupon rate and yield to? maturity

A 9-year bond pays interest of $26.70 ?semiannually, has a face value of $1,000?, and is selling for $762.49. What are its annual coupon rate and yield.

  Components of a working capital management strategy

What are the two major components of a working capital management strategy

  What is the profitability index for project

If the opportunity cost of capital is 11%, what is the profitability index for each project?

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