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Suppose you are restricted to investing in a portfolio of only 2 risky securities. The expected return on security A is 5% and the expected return on security B is 7%. The market portfolio, which is a combination of security A and B, has an expected return of 6%.
a.) Show how to construct an optimal portfolio with an expected return of 9%, assuming there is no risk-free asset.
b.) Show how to construct an optimal portfolio with an expected return of 7%, assuming there is a risk-free asset returning 2%.
c.) Suppose you form a portfolio by making a $10 investment in the risk-free asset and a $60 investment in the market-portfolio. What would the risk-free rate have to be if your portfolio has an expected return of 4%?
Suppose the current one-year interest rate is 2.5% and the two-year interest rate is 3.5%. Calculate the expected one-year interest rate one year from now.
What is the current value of the company? What will the value of the firm be if the company takes on debt equal to 40 percent of its levered value?
Suppose you purchase some shares of MLP common stock on margin at $50 per share. what is the maximum price to trigger a margin call?
Using the Gordon Growth Model, determine the intrinsic value of Apple Inc.'s stock price and compare it to the actual price of the price today.
If Airbus decides to hedge using money market instruments, What would be the guaranteed euro proceeds from the American sale in this case?
No dividends will be paid on stock over next 10 years because the firm needs to plow back its earnings to fuel growth.
Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 6% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert also has outstanding $1,000 par value 15-year straight debt with a 8% coupo..
The June futures price is 100 17/32. - Assume a 5.5 percent reinvestment rate. Determine the implied repo rate on the contract. Interpret your result.
Midstates Utility Corporation contracts with Northern Energy Company to buy 50,000 gallons of heating oil. Northern agrees to deliver the oil in five equal installments between October 1 and the following March 15. When Northern tenders the rest of t..
Old economy traders opens an account to short 1,000 shares of internet Dreams. describes the asset side of your account with the broker after the short sale?
You are currently a member of a club whose annual membership fee is $2,000. The fee is expected to increase by 3 percent per year. a. Would you buy for $65,000 a lifelong family membership to the club that can be passed down to your descendants? You ..
The market value balance sheet for Tidwell Manufacturing is shown here. What will the ex dividend price be?
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