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Assume that the economy has three types of people. 20% are fad followers, 70% are passive investors, and 10% are informed traders. The portfolio consisting of all informed traders has a beta of 1.2 and an alpha of 2.34%. The market has an expected return of 9% and the risk-free rate is 3%. What is the alpha for the fad followers? Enter your answer as a percentage to two decimal places (i.e. 0.12% rather than 0.0012; the percent sign is not necessary).
Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $90,000 and will generate net cash inflows of $19,000 per year for 11 years. What is the project's NPV..
Bucksnort, Inc., has an odd dividend policy. If you require a return of 12 percent on the company's stock, how much will you pay for a share today?
With respect to life insurance, what additional flexibilities are provided by variable and universal life policies as compared to a standard whole life policy? Two of the main types of mutual fund trading abuses mentioned in the text are market timin..
There is a mountain in North Carolina. In five (5) years, it will be zoned for 15 housing lots. At that time, one can install roads and infrastructure at a cost of $50,000 per lot. In the sixth year, with the infrastructure work complete, the lots ca..
A newly issued 10- year maturity, 5% coupon bond making annual coupon payments is sold to the public at a price of $810. The bond will not be sold at the end of the year. The bond is treated as an original - issue discount bond. a) calculate the cons..
Which one of the following characteristics is most associated with financing type projects?
Which one of the following is an example of a "flexibility" option?
A company is using the Profitability Index (PI) when evaluating projects. You have to find the PI for the company's project, assuming the company's cost of capital is 9.5%. The initial outlay for the project is $379,000. The project will produce the ..
What is the firm’s cost of equity?
Halliford Corporation expects to have earnings this coming year of $2.989 per share. what price would you estimate for Halliford stock?
You buy one share of RWG stock and one European 25-strike put option on RWG stock. For each of the following two RWG stock prices, find the value of your combined position in the stock and the put option on the expiration date of the option. a. On th..
Suppose Stan holds a portfolio consisting of a $10,000 investment in each of 8 different common stocks, equally. What is the portfolio's new beta?
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