What is the variance of the returns on RTF Inc. stock

Assignment Help Financial Management

Reference no: EM131995441

1. If the economy booms, RTF, Inc. stock is expected to return 11 percent. If the economy goes into a recessionary period, then RTF is expected to only return 5 percent. The probability of a boom is 64 percent while the probability of a recession is 36 percent. What is the variance of the returns on RTF, Inc. stock?

The answer should be one of the following:

0.000829

0.000884

0.001782

0.000216

0.028016

2. Young & Creative Inc. has a debt-equity ratio of 0.70. The cost of equity is 15 percent and the aftertax cost of debt is 5 percent. What will the firm's cost of equity be if the debt-equity ratio is revised to 0.80?

10.89 percent

11.47 percent

11.70 percent

13.89 percent

15.59 percent

Reference no: EM131995441

Questions Cloud

What is the additional cash flow in year three : The firm's marginal federal-plus-state tax rate is 30%. What is the additional (nonoperating) cash flow in Year 3?

What is the yield curve : What is the yield curve? Why is does it almost always slope upward? What influences its slope?

What is the value of firm : MindX has expected earnings before interest and taxes of $50,000, The debt is selling at par value. What is the value of this firm?

What makes for good investment-according to expected returns : What makes for good investment? Use approximate yield formula or a financial calculator to rank the following investments according to their expected returns

What is the variance of the returns on RTF Inc. stock : The probability of a boom is 64 percent while the probability of a recession is 36 percent. What is the variance of the returns on RTF, Inc. stock?

Paper fictional exchange rate press : The following exchange rates were published in today’s paper Fictional Exchange Rate Press.

What is your expected rate of return on stock : There is a 16 percent probability of a boom, a 75 percent chance of a normal economy. What is your expected rate of return on this stock?

New york plans to hedge its exposure with forward contract : New York plans to hedge its exposure with a forward contract that it will arrange today. Assume that interest rate parity exists.

You can borrow and lend at the risk-free rate : You have $209344 to invest in a stock portfolio. Assume you can borrow and lend at the risk-free rate.

User Account

All Pages