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Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 3.6% + 1.20RM + eA RB = –1.6% + 1.5RM + eB ?M = 16%; R-squareA = 0.25; R-squareB = 0.15 Assume you create portfolio P with investment proportions of 0.70 in A and 0.30 in B. 1. What is the standard deviation of the portfolio? (Do not round your intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.) Standard deviation % 2. What is the beta of your portfolio? (Do not round your intermediate calculations. Round your answer to 2 decimal places.) Portfolio beta 3. What is the firm-specific variance of your portfolio? (Do not round your intermediate calculations. Round your answer to 4 decimal places.) Firm-specific 4. What is the covariance between the portfolio and the market index? (Do not round your intermediate calculations. Round your answer to 3 decimal places.) Covariance
An agency problem can be alleviated by?
For the next 12 years, measured in today's dollars (real dollars), a family anticipates buying $5,000 worth of groceries each year. Inflation is expected to be 3 percent per year during this period. The market interest rate is 6 percent compounded an..
Joe owes Willy $5,000 from an old gambling debt. Joe knows that there is no way he can repay the debt in the near future.
The Bells Fish and wildlife company is considering two locations for new park.
A loan is being repaid by the amortization method with an installment at the end of each of 80 quarters at 6% annual effective interest, the first payment one quarter after the loan is made. In which payment are the principal and the interest most ne..
Advance, Inc is trying to determine its cost of debt. The firm has a debt issue outstanding with 10 years to maturity that is quoted at 108 percent of face value. The issue makes semiannual payments and has a coupon rate of 9 percent annually. What i..
What is teh weighted average cost of capital assuming that this company capital structure is the following: Debt 58%, Commonstock 40% and preferred stock 2%.
Three put options on a stock have the same expiration date and strike prices of $55, $60, and $65. The option prices are $3, $8, and $12, respectively. How should an arbitrager take advantage of the arbitrage opportunity if it exists? (Hint: Examine ..
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.49 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,010,000 in annual sale..
what is the intrinsic value (fair price) for this share of stock?
What does diversification mean in the context of corporate finance,
WACC and Capital Budgeting Problem: Apple Inc. is trying to solve an issue with short supply and poor distribution of its latest iPhone model in the Midwest. The company is considering a new manufacturing and distribution center near the new RidgePor..
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