What must be risk-free rate

Assignment Help Financial Management
Reference no: EM131510745

Assume both portfolios A and B are well diversified, that E(r_A) = 14.0% and E(r_B) = 16.4%. If the economy has only one factor, and beta_A = 1 while beta_B = 1.3. What must be the risk-free rate? (Do not round intermediate calculations. Round your answer to 1 decimal place.) Risk-free rate %

Reference no: EM131510745

Questions Cloud

Offer for the firm than it is truly worth : how much more will I offer for the firm than it is truly worth?
How much will you pay for the policy : The Maybe Pay Life Insureance Co. is trying to sell you an investment policy that will pay you and heirs $40,000 per year forever. If the required return on thi
Investors expect the stock to sell for at the end of year : What do investors expect the stock to sell for at the end of the year?
What is your best guess for the rate of return on the stock : what is your best guess for the rate of return on the stock?
What must be risk-free rate : What must be the risk-free rate?
Assume the risk-free rate-expected rate of return on market : Assume the risk-free rate is 8% and the expected rate of return on the market is 18%.
Biggest problem in creating proforma financial statements : What is the biggest problem in creating proforma financial statements.
What will the market price of the security : What will the market price of the security be if its beta doubles (and all other variables remain unchanged)?
Zero coupon bond-assume semi-annual compounding periods : what is the price of the bond? Assume semi-annual compounding periods.

Reviews

Write a Review

Financial Management Questions & Answers

  Due to the integrated nature of their capital markets

Due to the integrated nature of their capital markets, investors from the U.S. and the UK require the same real interest rate, 2.5% for their loans. There is consensus in the capital markets that the inflation rate will probably annual of 1.5% in the..

  What is present value of all future benefits

What is the present value of all future benefits if a discount rate of 8 percent is applied? Use Appendix B for an approximate answer, but calculate your final

  What is marys federal tax liability-marginal tax rate

Mary Jarvis is a single individual who is working on filing her tax return for the previous year. She has assembled the following relevant information. What is Mary’s federal tax liability? What is her marginal tax rate?

  Explain the nature of groups and group behavior

Explain the nature of groups and group behavior within organisations you identified and discuss factors that may promote or inhibit the development of effective teamwork in organisations you identified.

  Statement of financial performance

This one defines the company's financial state at POINT IN TIME. It lists the company's assets liabilities and equity at a particular point in time.

  If the appropriate required rate of return for his bond

Ford Motor Co. has BB rated bonds outstanding that mature in 24 years, and have a 7.625% coupon rate. Coupon payments are made semi-annually. If the appropriate required rate of return for his bond is 6.50, what is the value of the bond?

  Russo home services-calculate revised depreciation expense

Russo Home Services cleans homes and businesses especially those with upholstered furniture and plie carpets. To remain competitive with like businesses, three years ago the company invested in some important equipment. Calculate the net book values ..

  Use residual dividend policy to determine annual dividends

Suppose that Metrick, Inc. has a capital budget for the upcoming year of $100 million and it expects net income of $80 million. The company’s optimal capital structure is 40% debt and 60% equity. If Metrick follows a residual dividend policy, what wi..

  What return will the bank offer a depositor

Consider an economy with a large number of potential online game providers. The provider lacks the funds to start their projects. There is an equal number of investors who have the funds but no desire to create online games. Each investor has 50 good..

  What is the hedge that minimizes the risk

A company has a $20 million portfolio with a beta of 1.2. It would like to use future contracts on a stock index to hedge its risk. The index future price is currently standing at 1080, and each contract is for delivery of $250 times the index. What ..

  Early age since the cost of coverage increases the longer

"It makes good sense to purchase life insurance at an early age since the cost of coverage increases the longer you wait."

  What is the operating cash flow for the project

You are evaluating a project for your company. You estimate the sales price to be $210 per unit and sales volume to be 3,100 units in year 1; 4,100 units in year 2; and 2,600 units in year 3. The project has a three-year life.  The tax rate is 35 per..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd