What would be the beta of the replacement security

Assignment Help Financial Management
Reference no: EM13763912

An investor has a 10 security portfolio with a beta of 1.5, each with a market value of $5,000. If the investor wants to reduce the overall beta to 1.4 by eliminating a risk security with a beta of 1.7, what would be the beta of the replacement security?

Reference no: EM13763912

Questions Cloud

Market price-comparable market interest rates drop : What is the market price of a $1000, 8 percent bond if comparable market interest rates drop to 6 percent and the bond matures in 15 years?
Country present the biggest human resource challenge : From a human resource standpoint, in which country do you think a U.S. corporation would face the biggest challenge in terms of opening up an overseas division? Consider cultural, legal, economic, and any other factors you think would be relevant in ..
What is the market value of the outstanding preferred stock : Jones Design wishes to estimate the value of its out-standing preferred stock. The preferred issue has an $80 par value and has a dividend rate of 8 percent. Similar-risk preferred stocks are currently earning a 12% annual rate of return. What is the..
Minority shareholders have a greater chance of electing : Minority shareholders have a greater chance of electing a member to the board of directors if the company uses
What would be the beta of the replacement security : An investor has a 10 security portfolio with a beta of 1.5, each with a market value of $5,000. If the investor wants to reduce the overall beta to 1.4 by eliminating a risk security with a beta of 1.7, what would be the beta of the replacement secur..
Determine how you can maximize your revenue from candy sales : You have decided to enter the candy business. You are considering producing two types of candies: Slugger candy and Easy Out candy, both of which consist solely of sugar, nuts, and chocolate. At present you have in stock 10,000 ounces of sugar, 2,000..
Last claim on assets and a residual claim on income : Post your comments and respond to classmates' posts for this Discussion Question: If common stockholders are the owners of the company, why do they have the last claim on assets and a residual claim on income?
Define the decision variables and constraints : The Electrocomp Corporation manufactures two electrical products: air conditioners and large fans. The assembly process for each is similar in that both require a certain amount of wiring and drilling. Each air condition takes 3 hours of wiring and 2..
Development life-cycle of organizations : Stage 5 of "The Development Life-Cycle of Organizations" is known as

Reviews

Write a Review

Financial Management Questions & Answers

  Describe the dividend-discount model

The Dividend-Discount Model can be used to determine the value of a firm's equity-i.e., the current price of a share of stock. We will use this model to estimate the value of a share of your firm's stock and compare this estimate to the current ma..

  Finding the present value of all the cash inflows

You have estimated the value of a planned project by finding the present value of all the cash inflows from that project. Which of the following would cause the project to look more appealing (have a greater net present value)?

  What is the value of the bond today

A corporate bond’s annual interest is 5%, paid semi-annually and it matures in 12 years. If other bonds of similar risk return 4% annually, what is the value of the bond today?

  Assume perfect capital markets and no taxation

A company's debt is given by a bond that will mature in two years. After two years the company will terminate all activity. The company unlevered equity value in two years can be $17 millions with a 50% probability or $14 millions with probability 50..

  Define what is the current price of the bond

When it matures at the end of 7.5 years it pays out $1,000. If investors wish to earn 2.35% per year on this bond investment, what is the current price of the bond

  Suppose that the availability heuristics makes people more

assume that the availability heuristics makes people more risk averse populations drop at least in the short term.

  What rate of interest per annum did you earn

Two years ago, you invested $2,500. Today it is worth $2,809. What rate of interest per annum did you earn? Twenty years ago, your mother invested $15,000. Today, that investment is worth $76,681. What is the average annual rate of return she earned ..

  What is the value of the stock

A dividend was issued of $3.75 per share. Expected growth of 20% for next 5 years. after that the growth rate is expected to be 6% forever. If investors require a return of 8% for investing in the stock of companies of similar risk, what is the value..

  Explain whether anthonys orchard should invest

Explain how purchase of the apple press might affect the company's revenue goals. Based on this information, explain whether Anthony's Orchard should invest in the apple press.

  What effective annual rate are they paying

Binder’s Books offers customers credit terms of 4/10, net 40. If their customers don’t take the discount, what effective annual rate are they paying?

  What is the bonds current market value

Miracle Oil Corporation's bonds currently yield 3.5%; the annual interest payment is $45, the bonds have 6 years remaining until maturity. What is the bond's current market value?

  Annual rate of return of this conservative investment

Maryanne, a baby boomer who turns 50 today, begins to save for retirement with $200,000 that she just receives from a trust fund. She immediately invests this $200,000 in a stock fund. In addition, she plans to contribute $10,000, $15,000, and $20,00..

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