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A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 5%. The probability distribution of the risky funds is as follows: Expected Return Standard Deviation Stock fund (S) 17 % 30 % Bond fund (B) 11 22 The correlation between the fund returns is 0.10. You require that your portfolio yield an expected return of 14%, and that it be efficient, on the best feasible CAL. a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places. Omit the "%" sign in your response.) Standard deviation % b. What is the proportion invested in the T-bill fund and each of the two risky funds? (Round your answers to 2 decimal places.Omit the "%" sign in your response.) Proportion Invested T-bill fund % Stocks % Bonds %
Investors expect the market rate of return this year to be 10%. A stock with a beta of 1.7 has an expected rate of return of 15%. If the market return this year turns out to be 6%, what is the rate of return on the stock?
1. identify the key criteria and considerations that need to be taken into account in evaluating bfsi entry in the
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Woidtke Manufacturing's stock currently sells for $40 a share. The stock just paid a dividend of $1.00 a share (i.e., D0 = $1.00), and the dividend is expected to grow forever at a constant rate of 5% a year. What stock price is expected 1 year from ..
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To finance a new line of product, the Westchester Company has issued a bond with a par value of $1,000, coupon rate of 8 percent, paid semi-annually and maturity of 30 years. Compute the price of the bond if the required rate of return is 11 percent
During recent years your company has made considerable use of debt financing, to the extent that it is generally agreed that the percentage of debt in the firms capital structure (either in book or market value terms) is too high.
The firm you are CEO if has a current period cash flow of 1.0 million and pays no dividend. The present value of the company’s future cash flows is $2.5 million. The company is entirely financed with equity and there are 500,000 shares outstanding. A..
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