What is expected rate of return on your portfolio

Assignment Help Financial Management
Reference no: EM131459428

A different analyst uses a two–factor APT model to evaluate expected returns and risk. The risk premiums on the factor 1 and factor 2 portfolios are 3.25% and 2.48%, respectively, while the risk–free rate of return remains at 2.00%. According to this APT analyst, your portfolio formed in question 2 has a beta on factor 1 of 3.95 and a beta on factor 2 of 3.25. According to APT, what is the expected return on your portfolio if no arbitrage opportunities exist?

2. Stock A has a beta of 1.50 and a standard deviation of return of 32%. Stock B has a beta of 3.50 and a standard deviation of return of 58%. Assume that you form a portfolio that is 45% invested in Stock A and 55% invested in Stock B. Using the information in question 1, according to CAPM, what is the expected rate of return on your portfolio?

Reference no: EM131459428

Questions Cloud

What is the current operating profit for the company : a) What is the current operating profit for the company as a whole?
Define crm software : CRM software. ACT! is a type of customer relationship management software. Visit the Web site shown here and prepare a brief report about ACT! software.
Determine the approach that would carry the smaller risk : Determine the approach that would carry the smaller risk and the approach that would carry the bigger risk. Provide a rationale for your response.
Why is it important for these two religious traditions : What are some key difficulties/challenges that remain when these 2 traditions find ways to come together? How might we face those challenges?
What is expected rate of return on your portfolio : Using the information in question 1, according to CAPM, what is the expected rate of return on your portfolio?
Identify a total of three ethical issues : Please identify a total of three ethical issues that face Walmart and Apple and develop 2 approaches for addressing each of these three issues.
What rate would legally have to be quoted : A local finance company quotes an interest rate of 19.9 percent on one-year loans. What rate would legally have to be quoted?
Why is internal marketing important to a firm : Why is internal marketing important to a firm? Internal marketing enables all members of the organization to understand, accept, and fulfill their respective.
Identify the three levels of the marketing relationship : Identify the three levels of the marketing relationship. The three levels of the relationship marketing continuum are focus on price.

Reviews

Write a Review

Financial Management Questions & Answers

  Corporate bond with a face value

A corporate bond with a face value of $1,000 matures in 4 years and has an 8% coupon paid at the end of each year. What is the price of this bond if the yield to maturity is 10.15%?

  Find the bond equivalent and effective annual

At a coupon rate of 17%. Required: Find the bond equivalent (YTM) and effective annual (EAY) yield to maturity of the bond for the bond prices $1,045, $1,000, $1,145. Bond equivalent annual yield to maturity (YTM) Effective annual yield to maturity (..

  What type of bond would you want to issue

If you were the CEO of a large public company. e.g. Pepsi Co., and needed money, would you want to issue bonds? If so, what type of Bond would you want to issue? Would you want to borrow money from a Bank? Or, would you want to issue stock? What info..

  What is the bid–ask spread as percentage of par

Locate the Treasury bond in Figure 7.4 maturing in August 2026. Is this a premium or a discount bond? Premium bond Discount bond What is its current yield? What is its yield to maturity? What is the bid–ask spread as a percentage of par?

  Product is brought to market-firm conduct test marketing

Ang Electronics, Inc., has developed a new DVDR. If the DVDR is successful, the present value of the payoff (when the product is brought to market) is $33.6 million. If the DVDR fails, the present value of the payoff is $11.6 million. Calculate the N..

  Shareholders as the annual dividend

Michael's, Inc. just paid $2.60 to its shareholders as the annual dividend. Simultaneously, the company announced that future dividends will be increasing by 5.60 percent. If you require a rate of return of 9.8 percent, how much are you willing to pa..

  What is current price of the bond

Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. If the yield to maturity is 7.9 percent, what is the current price of the bond?

  The bond first and then find the yield to maturity

A bond has a current yield of 7%, a coupon rate of 8% with semiannual payments, a face value of $1,000 and matures in 10 years. What is its Yield to Maturity? (Hint: You have to find the price of the bond first and then find the Yield to Maturity)?

  Explain various aspect of finance that management understand

Explain the various aspects of finance that management must understand. Interpret the function of the Financial Balance Sheet in assisting in management's decision making process.

  What is the firm cost of equity

The market rate of return is 11.8 percent and the risk-free rate is 3.45 percent. Galaxy Co. has 36 percent more systematic risk than the overall market and has a dividend growth rate of 3.5 percent. The firm's stock is currently selling for $42 a sh..

  What is the sharpe ratio for stock

A- Investments B and C both have the same standard deviation of 20% and have the same correlation to the market portfolio. If the expected return on B is 15% and the expected return on C is 18%, which investment would investors prefer? B- The market ..

  The unlevered return to equity of firm in the same industry

The probability of having a recession next year is 30%, and the probability of an expansion is 70%. In a recession, the value of firm X will be 9; in an expansion, 17. The unlevered return to equity of a firm in the same industry is 18.26%. What is t..

Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd