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A stock has a beta of 1.14 and an expected return of 10.5 percent. A risk free asset currently early 2.4 percent.
a. What is the expected return on a portfolio that is equally invested in the two assets?
b. If a portfolio of the two assets has a beta of .92, what are the portfolio weights?
Lane French had a bad credit rating and went to a local cash center. He took out a $100.00 loan payable in two weeks at $109.50. What is the percent of interest paid on this loan? (Do not round intermediate calculations. Round your answer to the near..
Kwame owns one share of stock of Fairfax Paint and one share of stock of Litchfield Design. The total value of his holdings is 179 dollars. Both stocks pay annual dividends that are expected to continue forever. The expected return on Fairfax Paint s..
Briefly describe the company’s franchise structure which you researched. Suggest one (1) way in which the company could improve its franchise structure to make it more attractive to potential customers. Outline a fraud prevention plan for a retail or..
ABC Company's stock has a beta of 1.32, the risk-free rate is 5.25%, and the market risk premium is 5.50%. What is the firm's required rate of return?
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Goiânia Corporation is expecting to have EBIT next year of $11 million, with a standard deviation of $7 million. Goiânia has $35 million in bonds with coupon of 8%, selling at par, which are being retired at the rate of $2.5 million annually. Calcula..
Holiday Hiatus, a luxury vacation rental company, issued 15 year bonds to raise the capital needed to construct a five-star, all-inclusive tropical resort on the island of Bermuda. Those bonds are selling in the open market for $1,405, a premium in ..
The current dividend is $1.50, its current price is $15.90. You are an analyst and believe that the required return on Stock B is the same as that on Stock A. If Stock B pays a constant dividend of $ 2, what is your estimate of Stock B's price?
Suppose the reserve requirement for transaction deposits is 10% and it is 5% for nontransaction deposits. What is the total reserve requirement, in millions, for a bank with total deposits equal to $500 million, if $100 million of these deposits are ..
Sarah recently borrowed $30,000 to purchase a new car. The car loan is fully amortized over 5 years. In other words, the loan has a fixed monthly payment, and the loan balance will be zero after the final monthly payment is made. The loan has an APR ..
Construct a yield curve based on these reported yields, putting term-to-maturity on the horizontal (x) axis and yield-to-maturity on the vertical (y) axis.
Assume your utility has the form U: E(r) - ½(A)σ 2 ; at what level of risk aversion would be indifferent between holding Yahoo or Treasury notes? Suppose your risk aversion equals 4, you form a portfolio of 30% Yahoo and 70% Treasury notes, is this p..
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