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Rachel is a financial investor who actively buys and sells in the securities market. Now she has a portfolio of all blue chips, including: $13,500 of Share A, $7,600 of Share B, $14,700 of Share C, and $5,500 of Share D. Required: a) Compute the weights of the assets in Rachel's portfolio? (2 marks) b) If Rachel's portfolio has provided her with returns of 9.7%, 12.4%, -5.5% and 17.2% over the past four years, respectively. Calculate the geometric average return of the portfolio for this period. (2 marks) c) Assume that expected return of the stock A in Rachel's portfolio is 13.6% this year. The risk premium on the stocks of the same industry are 4.8%, betas of these stocks is 1.5 and the inflation rate was 2.7%. Calculate the risk-free rate of return using Capital Market Asset Pricing Model (CAPM). (2 marks) d) Following is forecast for economic situation and Rachel's portfolio returns next year, calculate the expected return, variance and standard deviation of the portfolio.
How many students will you recommend to the AD? What would be the profit for the given number of students? Is this profit maximizing? What is the relevance of the marginal rule in both decision making?
mcenro wishes to decide between two projects x and y. by using probability estimates he has determined the following
Why do the numerical examples in this chapter involve a large dividend in the last year of the explicit forecast period?
If the investment is risk free, and the relevant risk free interest rate is 6.6% per year, how much would you be willing to pay for the investment?
You want to buy a car, and a local bank will lend you $10,000. The loan would be fully amortized over 4 years (48 months), and the nominal interest rate would be 12%, with interest paid monthly. What is the monthly loan payment? Round your answer ..
Orion Flour Mills purchased a new machine and made the following expenditures.
Develop a financial plan to evaluate the venture and its viability.
Assume the bank in the previous question partially hedges the mortgage by selling three 10-year T-note futures contracts at a price of 100 20/32. Each contract is for $1,000,000. After two months, the futures contract has fallen in price to 98 24/32...
1. You're the sole owner of Duarte Spring Company; you paid $200K for the business when you acquired the firm five years ago. Duarte is a manufacturer of high-end springs used by major aerospace and aircraft manufacturing companies. Six months ago, y..
Grummon Corporation has issued? zero-coupon corporate bonds with a? five-year maturity? (assume $ 100$ face value? bond).
Briefly discuss the purpose and role that each type of financial institutions (depositary, contractual, and investment) play in the U.S. economy.
Computation of operating cash flows from capital project and evaluating a project which will increase sales by $50,000 and costs by $30,000
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