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Assume that the economy has three types of people. 20% are fad followers, 75% are passive investors, and 5% are informed traders. The portfolio consisting of all informed traders has a beta of 1.4 and an alpha of 3%. The market has an expected return of 10% and the risk-free rate is 4 %.
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).
Mike Flannery holds the following portfolio: What is the portfolio's beta?
Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances during the year,
Optimal capital structure Jackson Trucking Company is in the process of setting its target capital structure. The CFO believes the optimal debt-to-capital ratio is somewhere between 20% and 50%, and her staff has compiled the following projections fo..
Mary has an investment worth 55,500 dollars. The investment will make regular, fixed quarterly payments of 1,100 dollars to Bob forever with the first regular payment expected in 3 months from today. What is the expected quarterly return for the inve..
Estimate the increase in the number of insured adults. - Estimate the dollar cost per additionally insured adult. Why is it so much higher than $5,000?
what is the company's leveraged beta? What is the internal rate of return of the following set of cash flows?
A 10-year annuity-immediate pays 100 quarterly for the first year. Find the present value of this annuity.
What influences the payout ratio? Ascertain that you include the industry type and the product life cycle. How is it possible that a firm may ruin value by retaining its profit and investing in itself? To answer that question what two metrics should ..
A 5-year a corporate bond has the same default risk premium and liquidity premium as the 10-year corporate bond described. What is the yield on this 5-year corp
The company is currently producing and selling 250,000 jars of sauce annually. The jars of sauce sell for $4 per jar. The company is considering lowering the price to $3.60 per jar. Suppose this action will increase sales to 306,000 jars of sauce. Wh..
A company will buy 1000 units of a certain commodity in one year. It decides to hedge its exposure using futures contracts. The spot price and the futures price are currently $100 and $90, respectively. What futures position should the company take? ..
Explain how a firm that uses a single supplier for the best price on that good or service has a concentration risk (as Segal calls it), and how that might be addressed with basic risk management techniques.
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