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A stock has a beta of 1.1 and an expected return of 15 percent. A risk-free asset currently earns 5 percent. What is the expected return on a portfolio that is equally invested in the two assets?
?a. Referring to the same problem, if a portfolio of the two assets has a beta of .6, what are the portfolio weights?
?b. Referring to the same problem, if a portfolio of the two assets has an expected return of 9%, what is its beta?
?c. Referring to the same problem, if a portfolio of the two assets has a beta of 2.20, what are the portfolio weights?
You can earn $32 interest on a $1,000 deposit for 8 months. If the EAR is the same regardless of the length of the investment how much interest will you earn on a $1,000 deposit for:
How do warrants and convertible bonds differ from call options? Why would a corporation issue warrants or convertible bonds?
Concerning Fannie Mae-sponsored Mortgage Backed Securities (MBS): Identify which of the following statements is correct. The coupon rate on pass-through MBS sold to investors is always higher than the average coupon on the individual mortgages making..
Twice Shy Industries has a debt−equity ratio of 1.3. Its WACC is 8.6 percent, and its cost of debt is 7.4 percent. The corporate tax rate is 35 percent. What is the company’s cost of equity capital? What would the cost of equity be if the debt−equity..
If the prevailing interest rate is 3%, would you accept this project if you were offered an upfront payment of $10 to do so?
Ethan and Leigh-Ann enter a shipment agreement in which Ethan agrees to sell Leigh-Ann exercise equipment.
Suppose we observe the three-year Treasury security rate (1R3) to be 5.3 percent, the expected one-year rate next year—E(2r1)—to be 5.8 percent, and the expected one-year rate the following year—E(3r1)—to be 6.2 percent. If the unbiased expectations ..
Determine the present value of the interest tax shield of Westside Manufacturing, as well as the total value of the firm.
A friend of yours just bought a new sports car with a $4,000 down payment, and her $25,000 car loan is financed at an interest rate of 0.25% per month for 48 months. After 2 years, the "Blue Book" value of her vehicle in the used-car marketplace is $..
If an investment of $5,000 resulted in income of $1,000 per year for 10 years, then what was the Rate of Return (ROR), i%, on the investment? (b) Re-calculate the Rate of Return (ROR), i%, using the Excel RATE function and record your cell entry an..
what is the after-tax cash flow from the sale of this asset?
Describe the following capital budgeting calculations. Pay-back, Net Present Value NPV, and the Internal Rate of Return. Compare the calculations to each other and briefly discuss which method you think is most useful?
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