Reference no: EM131601788
Question: According to the analysts, the return on Company A's stock in the coming year could be -10%, 1%, 7%, or 15%. The corresponding probabilities are 25%, 15%, 20%and 40%, respectively.
In comparison, the return on Company B's stock in the coming year could be - 5%, - 1%, 4%, or 12%. The corresponding probabilities are 10%, 30%, 20%, and 40%, respectively. Suppose we have invested 35% of our capital in A's stock and 65% in B's stock. Historical data suggest that the correlation coefficient between the two stocks is 0.65.
- What is the standard deviation of each stock ?
- What is the expected return on our portfolio?
- What's the standard deviation of the return on our portfolio?
Company BW will pay dividends of $1.05, $1.18, and $1.56 over next three years (dividend will be paid at the end of each year). You are expecting the stock price to be $57.57 right after the company pays the 3rd dividend. In the following three years, the annual expected return on the market is 6.88%, annual T-bill rate is 0.58%.
Data suggest that company BW's beta is 1.78 and you are expecting the beta to remain the same in the following three years. What is the maximum price you are willing to pay for this stock today?
3. Explain the Capital Asset Pricing Model. Please include your understanding on systematic/non-systematic risks, diversification, market security line, and beta.
|
Discuss family and medical leave act
: Develop a PowerPoint presentation It should include a title slide, an agenda slide, body content slides, a closing slide
|
|
Sales outstanding on its cash conversion cycle
: Chastain Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding (DSO) on its cash conversion cycle.
|
|
Analyze competitive forces across dynamic environments
: Analyze competitive forces across dynamic and mature environments. Assess external growth strategy and trend in strategic management in competitive environment.
|
|
Write a function that prints the frequency
: FIT1008 - Intro to Computer Science - Write a function that prints the frequency of each temperature in the list between two given temperatures
|
|
What is standard deviation of the return on our portfolio
: In comparison, the return on Company B's stock in the coming year could be - 5%, - 1%, 4%, or 12%. The corresponding probabilities are 10%, 30%, 20%.
|
|
A quick overview of the agile approach
: A quick overview of the Agile approach is to include several iterations providing some of the expected features until the product is complete.
|
|
Exploring effects of climate change on antarctic ice sheet
: This activity is based on exploring the effects of climate change on the Antarctic ice sheet using satellite images from Google Earth.
|
|
Prepare income statement and retained earnings statement
: The objective of this project is to give the students an opportunity to learn accounting for intangibles, Prepare Income and Retained Earnings Statement
|
|
What is the standard deviation of each stock
: According to the analysts, the return on Company A's stock in the coming year could be -10%, 1%, 7%, or 15%. The corresponding probabilities are 25%, 15%.
|