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Last month, you found the tangency portfolio and constructed your optimal complete portfolio, which is a mix of the tangency portfolio and the risk-free asset. Today new information about the stock market is released and affects the moments (mean, variance, and covariance) of all stock returns. You update your belief on the moments, find the new tangency portfolio, and re-construct your optimal complete portfolio, given new information. The risk premium of the updated tangency portfolio is 1.42 times the previous one, and the volatility of the updated tangency portfolio is 1.1 times the previous one due to the new information. If the weight on the tangency portfolio was 0.6 and 0.4 on the risk-free asset in your previous optimal complete portfolio, what is the weight on the updated tangency portfolio in your re-constructed optimal complete portfolio? Assume your attitude to risk ( = price of risk) remains the same.
What is the value of this stock today at a discount rate of 12 percent?
Determine the EOQ and the total annual inventory holding cost.
The loan is for six years at 3.75% interest with monthly payments, and monthly payments begin one month after purchasing the car.
Which of the following tends to reduce industry profitability?
Compute the following financial ratios for long-term creditors for this year: Times interest earned ratio. Debt-to-equity ratio.
Discuss the separation of commercial banking and investment banking, over time.
A few years ago, Michael Tucker purchased a home for $134000. Today the home is worth $172000. His remaining mortgage balance is $61000. Assuming Michael can borrow up to 68 percent of the market value of his home, what is the maximum amount he can b..
The required rate of return on the stock is 12%. What is the stock's expected price 5 years from today (i.e. solve for P5)?
What is the cost of each of the common equity components? At what level of capital expenditures will there be a break in the MCC schedule?
Gil Co., currently has a debt-equity ratio of approximately 0.20. Its current stock price is $50 per share, with 2.5 billion shares outstanding. The firm has an equity beta of 0.50 and can borrow at 4.20%. The risk-free rate is 4%. The expected retur..
Calculate your annual shareholder return for each of the two years you owned the stock. Calculate your annual average compound return.
A frim is evaluating a project with an initial cost of $870,120 and annual cash flow of $345,994 per year (first cash flow to be received exactly one year from today) for each of the next 5 years. If the cost of capital for this project is 18%, what ..
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