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Question - (a) Mary has a portfolio consisting of 10 different companies' shares. She is considering selling all AAA shares in the portfolio that worth $50,000 and acquiring $50,000 of BBB shares to replace the AAA shares. AAA shares and BBB shares have the same expected return and standard deviation. Her friend Alice comments, "It will not make a difference whether you keep all of AAA shares or replace them with $50,000 of BBB shares'.
(i) Explain the circumstance(s) under which you would agree with Alice's view.
(ii) Explain the circumstance(s) under which you would disagree with Alice's view.
(a) "A fully diversified portfolio constructed by purchasing every risky asset in a market has a beta of zero." Do you agree or disagree with the statement? Explain your reasoning.
Amy owns shares in Belmont Ltd. Currently Belmont shares are priced at $48.50 per share in the stock market. The company expects its dividend to grow at a constant rate of 5% per year forever. Its last dividend was worth $2.50. What is the value of the shares if Amy's required rate of return for the shares is 11% per year? Should Amy buy additional Belmont shares or sell all the Belmont shares she owned? Explain your answer.
Show the T-ledger accounts for the Allowance for doubtful debts and Accounts receivable for the year ended 31 December 2016
State how much each class of stock should receive under each of the preferred stock is noncumulative and nonparticipating conditions.
Present value of annuity due of 1 for 4 periods discounted at 10% is 3.48685. How much is the gross investment in the lease prior to the first payment
Assume that the correlation between the returns of the two securities is 0.25. Calculate the expected return and standard deviation.
Calculation of total contribution margin and variable costs analysis - Iacono Corporation is a wholesaler that sells a single product.
Included in the property, plant and equipment of Sanford Ltd is a freehold land recorded at cost of $1,000,000. Define and compute Non-Controlling Interest
Complete the journal entry made by Frylock to account for an asset purchase of Meat Wad on 12/31/17 by entering the required amounts into the gray shaded cells. When correct, the cells will change color:
The second alternative earns 6% for the first year and 10% for the second year. Interest compounds annually. Which alternative should you choose?
Compute the January 31 ending inventory and cost of goods sold for January, assuming Denver uses FIFO
Find what will be price of a share of a company with 5 million USD in balance sheet - equity, 500,000 shares of stock outstanding, and a price/book value ratio
The preferred shares pay an annual dividend of $4 per share. Crane's tax rate is 40%. Calculate Crane's 2020 diluted earnings per share
On July 1, 2020, a competitor obtained rights to a patent which made Dragon Fruit's patent obsolete. How much is the loss from the patent obsolescence
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