Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Suppose you are considering investment in a stock fund and a bond fund. The following table summarizes the risk and return characteristics of the above two funds.
Fund Expected return and Standard deviation
Stock 13% 18%
Bond 6% 9%
The correlation of rates of return between the stock fund and the bond fund is -0.1 and the risk-free return is 2%.
i. Using the above information, determine the expected return and standard deviation of the optimal risky portfolio consisting of the stock fund and the bond fund.
ii. The article states that ‘borrowed money can make even an optimally diversified — and theoretically ‘safe’ — portfolio risky’. Assuming the margin debts will not be ‘called’, demonstrate whether the above statement is correct if you borrow 50% of your fund at the risk-free rate and invest in the optimal risky portfolio in(b)(i).
iii. Messrs Jacobs and Levy argue that modern portfolio theory needs urgent updating to account for the devastation that can be wrought by borrowed money. Briefly explain whether you agree with them.
Consider the following information: Stock Return if Market Return Is: Stock –10% +10% A 0 +20 B –20 +20 C –30 0 D +15 +15 E +10 –10 What is the beta of each of the stocks?
Find the current dividend on a stock, given that the required return is 9 percent, the dividend growth rate is 6 percent, and the stock price is $50 per share
Another option for financing is to call in the outstanding bonds you have issued and obtain a loan with more favorable terms than the bonds you would issue. Presently, the company has a 6% coupon bond that matures in 11 years. The bond pays interest ..
Microhard has issued a bond with the following characteristics: Calculate the price of this bond if the YTM is 7%
Fuller Ice Cream Company buys 73,000 gallons of milk annually. Due to state regulations, it cannot store the milk for more than 8 days. Find the optimal size of its milk storage tank. The price of milk is $3 per gallon, and the cost of capital for Fu..
A stock is currently priced at $ 63 and has annual standard deviation of 43 percent. The dividend yield of the stock is 2 percent, and the risk-free rate is 4 percent. What is the value of a call option on the stock with a strike price of $ 60 and 45..
Step By Step way to answer this question answer from my professor is -13,282.71 What is the NPV of a project that costs $100,000, provides $23,000 in cash flows annually for six years, requires a $5,000 increase in net working capital, and depreciate..
What some of the factors that a finance manager considers in choosing an appropriate discount rate for a capital investment project
Many projects use a resource that the company already owns. When evaluating a capital budgeting decision, we generally include interest expense. Only include as incremental expenses in your capital budgeting analysis the additional overhead expenses ..
On January 1, 2015, Canden Company started to make annual deposits in order to accumulate $1,000,000 by January 1, 2019. This fund will earn annual interest of 9%. Required: What are the four annual deposits that Canden should make at the beginning o..
Collect and evaluate the data about stock performance of PepsiCo for the last one year. Compare the results that you received against the industry or main competitor (Coca-cola Company).
consumption allowances were 4 billion; personal savings were estimated at $2 billion; imports of goods and services amounted to $6.5 billion; and the exports of goods and services were $5 billion. a. Determine the nation's gross domestic product.
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!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd