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You are the new investment manager of Michael and Ariel. You received from the previous investment manager of Michael and Ariel's partial information regarding their portfolios:
- Both have an optimal portfolio.
- The expected return in Michael's portfolio is 6%. - The SD in Ariel's portfolio is 12%.
-You know that the current risk-free interest rate is 5% and the market portfolio has an expected return of 8% and a SD of 10%.
a. What is the proportion of each brother's investment in a risk-free asset out of their portfolio?
b. Is it possible to rank the brothers' risk preference? Explain.
c. What is the beta in each brother's portfolio?
d. Suppose that today Michael and Ariel received an offer to buy a share with an expected return of 6% and beta of 0.3. Will they accept the offer?
Why is measuring the cost of capital important to a company? What are some challenges associated with measuring the cost of capital, specifically debt and equity? What are risks associated with debt and equity financing decisions
The annual expenses on the property (real estate taxes, maintenance, etc.) are $9000, realized at the end of each year. Find the amount of rent that Rayleigh must collect at the end of each year to break even.
The cost of capital for the mine is 12 percent. What is the value of the mine?
Illustrate how fine-line inventory classification can be used with product and market segments. What are the benefits and considerations when classifying inventory by product, market, and product/market?
Prepare a Stockholders' section of a classified balance sheet as of December 31, 2015 (after taking into consideration your journal entries)
They also deposited $500 on each of her birthdays until she was 18 (including her 18th birthday). How much will be in the savings account on her 18th birthday (after the last deposit)?
a. Determine the net profit using the accrual basis of accounting. b. Determine the net profit using the cash basis of accounting.
Estimating Returns. Hope (from problem 1) later sells her shares in the mutual fund for $37 per share. What would her return be in problems 1 and 2?
A Pharma company has recently recruited 4 scientists at an average age of 27 and is looking to develop quite a few pharmacological formulations.
If i invest the entire 20 million in this pertpetuity what is the growth rate that i will need to break even?
Suppose that the premium on a European put option, p = $3. The time to maturity, T = 1 year. Make sure that you demonstrate the relation that must be satisfied to eliminate the arbitrage opportunity
Jeremy Kohn is planning to invest in a 10-year bond that pays a 12 percent coupon. The current market rate for similar bonds is 9 percent. Assume semi-annual coupon payments.
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