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Question 1: Consider the following capital market: a risk-free asset yielding 3.00% per year and a mutual fund consisting of 75% stocks and 25% bonds. The expected return on stocks is 13.95% per year and the expected return on bonds is 4.50% per year. The standard deviation of stock returns is 42.00% and the standard deviation of bond returns 18.00%. The stock, bond and risk-free returns are all uncorrelated. What is the expected return on the mutual fund? Enter your answer rounded to two decimal places.
Question 2: Using the data from problem 1, what is the standard deviation of returns for the mutual fund? Enter your answer rounded to two decimal places.
Question 3: Using the data from problem 1, now, assume the correlation between stock and bond returns is 0.36 and the correlations between stock and risk-free returns and between the bond and risk-free returns are 0 (by construction, correlations with the risk-free asset are always zero). What is the standard deviation of returns for the mutual fund with this new higher correlation?
a. What are the two projects' net present values, assuming the cost of capital is 5%? 10%? 15%? b. What are the two projects' IRRs at these same costs of capital?
ABC Company has net income of $90,182, return on assets of 9.4 percent, and debt-equity ratio of 0.53. What is the return on equity?
The target capital structure for QM Industries is 35% common stock, 6% preferred stock, and 59% debt. If the cost of common equity for the firm is 17.2%, the cost of preferred stock is 9.8%, the before-tax cost of debt is 7.8%, and the firm's tax ..
If the relevant tax rate is 35 percent, what is the aftertax cash flow from the sale of this asset?
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In this first journal activity, you may write about any topic(s) of your choice, but it is best to use the textbook to study.
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A shareholder has a $10,000 portfolio that is allocated as follows; short 100 shares of stock A, purchase 250 shares of B and 200 shares of 3. Any additional funds are borrowed at risk free rate of 0.04.
Dewey's expects sales of $530, $560, $740, and $790 for the months of April through July, respectively. The firm collects 23 percent of sales in the month.
High Flyer, Inc., is considering an investment in a new distribution center. High Flyer's CFO anticipated additional earnings before interest and taxes
If the investment bankers retained $1.26 per share as fees, what were the net proceeds to eBay? What was the market capitalization of the new shares of eBay?
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