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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.
calculation of money the publisher can put into advertising and still break even.elephant books sells paperback books
How banks offer diversification to savers even if a depositor puts all of their funds into a single bank account. Which one has the highest level?
Santana Rey created Business Solutions on October 1, 2015. The company has been successful, and its list of customers has grown. To accommodate the growth, the accounting system is modified to set up separate accounts for each customer.
Determine the selling price of the bonds. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)
Discuss the difference between charismatic leadership and transformation leadership. Discuss what characteristics are good leadership traits
Firm recognizes 469,500 ordinary business income and 14500 loss on sale of investment asset in first year....recognizes 547000ordinary business income and 21400 section 1231 gain and a 9020 section. 1231 loss....compute book and taxable income for bo..
Debt has deadlines. Deadlines can be missed. Common stock lasts indefinitely. The higher percentage of resources raised from debt, the higher percentage resources subject to deadlines, hence risk. What is the effect on return on equity of raising cap..
Calculate the carrying amount of the building at the date of disposal. On 1 October 2010, Panama Ltd acquired a building for $200,000.
Discuss why the cost of equity is greater than the cost of debt and do you agree to the suggestion of management to issue debt to finance the RM 20 million
Company produced 300,000 units of products using the machinery. What is the depreciation expense of the equipment for the year ended December 31, 2014?
How to Discuss the pros and cons of the consultant's proposal. What further justification should management demand before buying?
95% of all business are choosing to open as LLC's or LLP's. Why do you think they are abandoning the customary Corporation or partnership status?
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