What is the expected return for the combined investment

Assignment Help Financial Management
Reference no: EM131176592

Stock A has an expected return of 17.6% and Stock B has an expected return of 11%. Suppose you decide to invest all of your investment funds in these two stocks, and 69% is invested in Stock A. The correlation coefficient of returns for these two stocks is 0.27. What is the expected return for the combined investment in these two stocks? (Answer to the nearest tenth of a percent (i.e., 12.3 but do not use the % sign). 

Reference no: EM131176592

Questions Cloud

Bottom-up budgeting process with top-down budgeting process : Compare and contrast the bottom-up budgeting process with the top-down budgeting process. Make sure to discuss their advantages and disadvantages in regard to estimating project budgets and when it is appropriate to use each process.
How do sunk costs affect the determination of cash flows : Should you focus on cash flows or accounting profits in making the capital-budgeting decision? Should you be interested in incremental cash flows, incremental profits, total free cash flow, or total profits? How does depreciation affect free cash flo..
Cash breakeven point is a production level : Suppose it has been determined that the cash breakeven point is a production level of 5,000 units per year, the accounting breakeven point is a production level of 8,000 units per year, and the financial breakeven point is a production level of 12, 0..
One of the primary function of financial market : One of the primary function of a financial market is to
What is the expected return for the combined investment : Stock A has an expected return of 17.6% and Stock B has an expected return of 11%. Suppose you decide to invest all of your investment funds in these two stocks, and 69% is invested in Stock A. The correlation coefficient of returns for these two sto..
Determined its optimal capital structure : Collins Manufacturing Company has determined its optimal capital structure, which is composed of the following sources and target market value proportions: Target Market - Source of Capital Proportions Long-term debt 30% Preferred stock 10% Common st..
The dividend payout ratio is expected to remain : A company is expected to have earnings of $3.46 per share next year, $4.89 in two years, and $5.82 in three years. The dividend payout ratio is expected to remain at 30% over the next three years. You estimate the risk-free rate to be 3% per year and..
Considering substantial investment in the stock : Kruger Associates is considering a substantial investment in the stock of McIntyre Enterprises. McIntyre currently (time 0) pays a dividend of $1.50 per share. This dividend is expected to grow at 15 percent per year for the next 3 years and 10 per- ..
What would be an appropriate estimate of stock price today : A company is expected to pay a dividend of $1.36 per share one year from now and $1.72 in two years. You estimate the risk-free rate to be 5% per year and the expected market risk premium to be 5.8% per year. In two years, you expect the leading PE r..

Reviews

Write a Review

Financial Management Questions & Answers

  What is the accounting break-even level of output

You are considering a new product launch. The project will cost $1,800,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Accounting break-even-What is the degree of operating leverage at the accounting brea..

  What is the predicted price change for your bond

The duration of GE bond you own is 6.00 years. Currently, interest rates are 7.00%, but you believe the Fed is about to increase interest rates by 24.00 basis points. What is the predicted price change for your bond?

  1the shareholders of jolie company have decided in favor

1. the shareholders of jolie company have decided in favor of a buyout from pitt corporation. information about each

  Discuss pros-cons of capitalizing leases-related assets

One advantage of leasing voiced in the past is that it kept liabilities off the balance sheet, thus making it possible for a firm to obtain more leverage than it otherwise could have. This raised the question of whether or not both the lease obligati..

  What is the geometric average return

Hacker Corporation's stock produced returns of 15%, 26%, 7%, -13%, and 11% last five years. What is the arithmetic average return and the standard deviation of the stock's returns for the period? what is the geometric average return?

  How long will take to double your money with interest rate

How long will it take to double your money with an interest rate of 10 percent? 20 percent? 40 percent? What about tenfold increase in your money with a growth rate of 50 percent? On the advice of your broker ten years ago, you invested in a $6 stock..

  Utilizing past cost and expense ratios

In a period of rising sales, utilizing past cost and expense ratios (percent-of-sales method) when preparing pro forma financial statements will tend to ________.

  Stock expects the future free cash flows

You are working on the valuation for an upcoming IPO. The company that wants to sell its stock expects the following future free cash flows (FCF, in millions of dollars): -6 in year 1, 9 in year 2, 16 in year 3, and cash flows are expected to grow st..

  What are two criteria needed to use constant growth model

Last Year's Dividend (Do) $9.00 Constant Dividend growth rate 3% Required Rate of Return 11%. What are the two criteria needed to use the Constant Growth Model?

  Payback statistic for project

Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 10 percent and the maximum allowable payback is 5 years. TIME: 0 1 2 ..

  A finance company has rate-sensitve assets

A finance company has rate-sensitve assets of $20 million and rate-sensitive liabilities of $15 million. Should it be an interest-rate swap buyer (and make fixed-rate payments) or seller (and make variable-rate payments? Explain.

  What was the lowest dividend yield over the past year

Find the quote for the Laclede Group. Assume that the dividend is constant. What was the lowest dividend yield over the past year? What was the highest dividend yield over the past year?

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