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Ms. Gambling chooses a risky portfolio, P, with an expected return of 0.20 and a standard deviation of 0.18. The risk-free rate equals .05. She wants to invest 30% in RF and 70% in P.
a) What is the RF-P portfolio's expected return?
b) What is the RF-P portfolio's standard deviation
c) What is the CML equation for the risky portfolio P and the risk-free asset, RF?
A bank has made a 8-year, $2,000,000 loan that pays annual interest of 7 percent. Is it better off selling this loan without recourse? Why?
Suppose Intel stock has a beta of 1.8, whereas Boeing stock has a beta of 1.2. If the risk free interest rate is 5% and the expected return of the market portfolio is 15%, according to the CAPM, What is the expected return of Intel stock? What is the..
Suppose Palmer Properties is considering investing $2.6 million today (i.e., C0 = -2,600,000) on a new project that is expected to last for 7 years. What is the payback period for the project? Show your work. What is the net present value of the proj..
Calculate the return on an investment and Understand the historical returns on various important types of investments.
Deltona issued preferred shares four years ago at $60 per share, with a promised dividend of $5 per share. The company's tax rate is 35%, and its common stock beta is 0.80. Yields on comparable risk preferred stocks are 7%. The floatation expense per..
How does the size of the firm affect its perceived risk? Be specific? How would you estimate the beta for a publicly traded firm? For a private firm?
How low would the interest rate on the loan with the compensating balance have to be for you to choose it?
What is the Initial Investment for this venture? What is the Depreciable Base for the project? What is the 3rd year's operating cash flow?
You have just purchased a new warehouse. To finance the purchase, you’ve arranged for a 37-year mortgage loan for 85 percent of the $3,270,000 purchase price. The monthly payment on this loan will be $16,000. Requirement 1: What is the APR on this lo..
Mike and Sarah want to reduce market risk of their portfolio but stay 100% invested in current long stock positions? What could they do to accomplish this goal?
XYZ, Inc. just paid $2.00 dividend. Dividends are expected to grow at a 20% rate for the next five years. After that, the company has stated that the annual dividend will be $2.50 per share indefinitely. The required rate of return is 10%. What is th..
What is the difference between bank discount rate and bond equivalent yield? Distinguish between price weighted average index and market weighted index. Explain the difference between a put option and a short position in future contracts? What is the..
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