A risky portfolio has an expected rate of return of 14% and a standard deviation of 20%. The risk-free asset has a rate of return of 5%. The complete portfolio (which has a mixture of the risky asset and risk-free asset) has a standard deviation of 12%. What proportion of the complete portfolio is invested in the risky portfolio? 12% 100% 40% 60%
Q: If a company reduces their fixed costs from $219,000 to $158,000 when the selling price of $35 per…
A: Operating profit is that amount which exclude all the expenses from the sales which is incurred by…
Q: iger Golf Supplies has $21 million in earnings with 6 million shares outstanding. Its investment…
A: Total Earning = te = $21 millionNumber of Shares = n = 6 millionPrice to Earning Ratio = pe =…
Q: Arnold Inc. is considering a proposal to manufacture high-end protein bars used as food supplements…
A: Initial cost = $1,300,000Sales = $4,500,000Manufacturing cost and operating expenses = 80% of…
Q: If 28200 dollars is invested at an interest rate of 5 percent per year, find the value of the…
A: Expected value of the investment at the future date is known as the Value of Investment. Cash flow…
Q: Esfandairi Enterprises is considering a new three-year expansion project that requires an initial…
A: A company's operating cash flow offers information about its capacity to earn cash from its ongoing…
Q: Consider the following projects: Cash Flows ($) Co Project D E -11,100 -21,100 C₁ 22, 200 34,500…
A: The Profitability Index is a financial indicator used to evaluate the attractiveness of an…
Q: "What is the yield to maturity on a 9 percent coupon (paid semiannually) bond, with a $1,000 face…
A: Yield to maturity is the rate of return realized on bond when held till maturity of bond period and…
Q: A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a…
A: Here, Expected Return E(R )Standard Deviation Stock Fund (S)17%35%Bond Fund (B)14%18%Risk Free…
Q: State of Economy Bust Boom Probability of State of Economy 0.30 0.70 Bust Security Returns if State…
A: Expected return is defined as the amount of money an investor could earn or lose on an investment at…
Q: Please give solution in correct and step by step format thanku Don't give solution in image…
A: Payback period is a capital budgeting tehnique used for making investment decisions.Payback period…
Q: You have been offered a unique investment opportunity. If you invest, $10400 ?today, you will…
A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…
Q: Suppose you deposited $39,000 in a bank account that pays 5.25% WI daily compounding based on a…
A: Future value is the amount initially deposited and amount of comounding interest accumulated over…
Q: In order to start a small business, a student takes out a simple interest loan for $3000 for 9…
A: Simple interest loan is based on the concept of simple interest. Here the interest amount is…
Q: You purchase on 50% margin, 150 shares of a stock with the following quotes: Bid Ask $24.00 $22 The…
A: The maintenance margin refers to the minimum amount of money that should be kept in the account as…
Q: Year 1 2 3 4 Cash Flow $800 1,010 1,280 1,180
A: Present value is the equivalent value based on the time value of money of the future cash flow that…
Q: Kurt owns a convertible bond that matures in 16 years. The bond has a coupon rate of 6 percent paid…
A: Solution:-Bond price means the price at which a bond should trade in the market. It is the summation…
Q: Company Z-prime’s earnings and dividends per share are expected to grow by 3% a year. Its growth…
A: The Dividend Discount Model (DDM) is a financial valuation approach used to estimate the intrinsic…
Q: Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$…
A: Profitability Index is also known as PI. It is a capital budgeting technique which helps in…
Q: Green & Company is considering investing in a robotics manufacturing line. Installation of the line…
A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…
Q: Fama's Llamas has a weighted average cost of capital of 9.3 percent. The company's cost of equity is…
A: The WACC of the company refers to the return that the company provides to all its stakeholders for…
Q: PREFERRED STOCK-DIVIDEND The 8.0% $100-par, preferred stock is trading at $64.00. If the preferred…
A: The preference dividend is the type of payment that is paid to the preference shareholders who are…
Q: Gateway Communications is considering a project with an initial fixed assets cost of $169 million…
A: NPV is one of the most popular method of valuation in capital budgeting. NPV is a method that helps…
Q: Consider historical data showing that the average annual rate of return on the S&P 500 portfolio…
A: It is helpful in reflecting the average of how far away every value is from the expected return. It…
Q: Stevenson's Bakery is an all-equity firm that has projected perpetual EBIT of $159,000 per year. The…
A: Value of Unlevered firm = Value of levered firm = Value of Unlevered firm + Value of tax savings on…
Q: What is the current value of the cash flow represented below? 0 1 H 2 3 (100) 200 200 i = 4% 4 H…
A: Present value is the current worth or value of a future cash flow or series of cash flows,…
Q: Haulsee Inc. pays no dividend currently but is expected to start paying a small dividend next year.…
A: According to Capital asset pricing model ,ke = Rf+[b*(Rm-Rf)]whereke= cost of equityRf = risk free…
Q: Colin is 40 years old and wants to retire in 27 years. His family has a history of living well into…
A:
Q: signs agreement for Out of this, the lender charges a $500.00 loan origination fee and two discount…
A: Amount borrowed is different from the actual money borrower get due to charges involved in the loan…
Q: Doisneau 20 year bonds have an annual coupon interest of 7 percent, make interest payments on a…
A: Par value of bond (FV) = $ 1000Coupon rate = 7%Semi annual coupon amount (C) = 1000*0.07/2 = $…
Q: 16-year, 8% annual coupon, $1,000 par value bond that sells for and can be called after five years…
A: Some bonds have option to be called before maturity of bond period to give investors exist option…
Q: t to buy a Honda Civic. The MSRP is $26,185. Honda offers a purchase financing plan with no money…
A: Loan amount is the present value of the payment done for the loan based on time value of money and…
Q: nterest expense for Rhodes Manufacturing was $500,000 in 2018. During 2018, $3.7 million in old debt…
A: Cash flows to bond holders will be interest paid, debt repaid and new debt raised. Cash flows to…
Q: The Sisyphean Company has a bond outstanding with a face value of $5,000 that reaches maturity in 8…
A: The yield to maturity is the total return an investor has earned by holding the bond until its…
Q: Authorized and available shares Aspin Corporation's charter authorizes issuance of 2,100,000 shares…
A: Authorized Shares: These are the maximum number of shares a corporation is legally allowed to issue…
Q: A downtown bank promises its potential employees a $ 5000 sign-on bonus, an additional bonus of $…
A: Solution:Present value means discounted value of future cash flows at market discount rate.
Q: Codiac Corp. currently has an all-cash credit policy. It is considering making a change in the…
A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…
Q: Marcy is 45 years old. Her portfolio for retirement is currently valued at $260,000, and she saves…
A: The FV of an investment refers to the combined worth of the cash flows of the investment at a given…
Q: r. Bearer may choose to take a lump-sum payment of $25,292.8 now from his insurance policy or an…
A: Annuity is the series of equal payments that are made at regular intervals and payments are uniform…
Q: evenue ost of Goods Sold perating Expenses preciation ЗІТ terest xes et Income 61,400 19,648 15,964…
A: The degree of financial leverage (DFL) and the degree of combined leverage (DCL) can be calculated…
Q: What is the expected return of the following investment? Actual Return Probability 35% 10% 40% 15%…
A: The expected return is the estimation of profit or loss that an investor determines from his…
Q: Cellular Access, Inc. is a cellular telephone service provider that reported net income of $255…
A: Free cash flow is calculated as follows:-Free cash flow =
Q: jay aquire is considering the purchase of the following: a builtrite 1000 par, 6 5/8% coupon rate,…
A: Present value of a bond:The present value of a bond refers to the current worth of all future cash…
Q: Which of the following independent projects should the company accept?
A: IRR is the internal rate of return. This is the return % that the project generates. If the IRR is…
Q: Problem 10-32 (Algo) A 25-year maturity, 8.4% coupon bond paying coupons semiannually is callable in…
A: A bond is a kind of debt security issued by the government and private companies to the public for…
Q: If you put up $28,000 today in exchange for a 8.75 percent, 19-year annuity, what will the annual…
A: Annuity is that under which investor will received the equal amount every year which includes the…
Q: 9. A bank has value of $7 requires a with no oth $40 milliom $3.6 million $40 million a. What is…
A: Commercial loan value = $70,000,0001st loan value = $30,000,0001st loan repayment at the end of 3…
Q: A local finance company quotes a 17 percent interest rate on one-year loans. So, if you borrow…
A: Effective Annual Rate, is a financial metric that represents the annual interest rate on an…
Q: In which of the following tables would all present value factors be less than or equal to one?…
A: Solution:Present value factor refers to the discounted value of $1 discounted at “r%” rate of…
Q: Omega Corp has paid the following dividends in these years: 2020 2019 2018 2017 2016 What is the…
A: Dividends are the profits that the company distributes to its shareholders during the financial…
Q: A mortgagee is entitled to certain consideration in the event of a loss to property when indicated…
A: A mortgage is the entity that lends money to the borrower to purchase any asset. A mortgage provides…
Step by step
Solved in 3 steps with 3 images
- Suppose the risk-free rate is 6 percent and the market portfolio has an expected return of 12 percent. The market portfolio has a standard deviation of 7 percent. Portfolio Z has a correlation coefficient with the market of 0.35 and standard deviation of 6 percent. According to the capital asset pricing model, what is the expected return on portfolio Z a. 12.6 percent b. 7.8 percent c. 9.87 percent d. 12.05 percentThe optimal risky portfolio has an expected return of 15% and a standard deviation of 10%. The risk-free rate is 1%. What is the fraction of wealth that should be invested in the optimal risky portfolio (with the rest in the risk-free asset) for a risk-averse investor with a risk aversion coefficient A equal to 1.7? O 83.33% 88.24% 78.95% 75%A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7 percent and a standard deviation of 10 percent.The risk-free rate is 4 percent, and the expected return on the market portfolio is 12 percent. Assume the capital asset pricing model holds. Compute and justify the expected rate of return would a security earn if it had a 0.45 correlation with the market portfolio and a standard deviation of 55 percent.
- b. A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7 percent and a standard deviation of 10 percent. The risk-free rate is 4 percent, and the expected return on the market portfolio is 12 percent. Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a 45 correlation with the market portfolio and a standard deviation of 55 percent?You compute the optimal risky portfolio to have the expected return of 12% and standard deviation of 20%. The risk free rate is 4%. What will be the standard deviation of the complete portfolio of risk free asset and the optimal risk portfolio, for a risk averse investor with risk aversion index A=6. O 1.11 О 3.33 O 5.67 O 6.67 O None of aboveSuppose the total risk of Portfolios A, B and C are 49% ², 64%² and 100% ² respectively. The market price of risk is 8%. The Market Portfolio (M) has an expected return and a total risk of 11% and 100% respectively. (a) You want to form another Portfolio H by investing $7,000 in Portfolio A and $3,000 in Portfolio B. Compute the standard deviation of Portfolio H if the correlation coefficient between Portfolio A and Portfolio B is: i) perfectly positively correlated ii) uncorrelated iii) perfectly negatively correlated (b) If the expected return of Portfolio C is 9.4% and it is lying on the Securities Market Line, what is the beta of Portfolio C? State the answer in %². (c) Is Portfolio C a Market Portfolio as it has same level of total risk (i.e. 100% 2) as the Market Portfolio? Why or Why not?
- An optimal risk portfolio’s expected return is 14%, standard deviation is 22%. If risk-free rate is 6%, then what would be slope of the best CAL? A) 0.64B) 0.14C) 0.08D) 0.33E) 0.363. Asset 1 has an expected return of 10% with a standard deviation of 25%, and asset 2 has an expected return of 15% and a standard deviation of 35%. The covariance between the returns is 0.0175 and the risk-free rate is 8%. (a) What is the optimal portfolio consisting of risky assets and risk-free asset if you want an average return of 0.10? Answer. (b) Can you find a portfolio consisting of risky and risk-free assets with average return of 0.10 and variance of return 0.009? Why or why not? Answer.The beta on risky asset A is 1.8 and the beta on risky asset B is 1.1. The expected return on the market portfolio is 10% and the risk free rate of return is 4%. Consider a portfolio comprising the two risky assets and the risk-free asset where you invest 50% in risky asset A and 30% in risky asset B. What is (i) the beta of a portfolio and (ii) the expected return of the portfolio? a None of the above b (i) 0.97 and (ii) 9.82% c (i) 1.23 and (ii) 9.82% d (i) 1.23 and (ii) 11.38% e (i) 0.97 and (ii) 11.38%
- A portfolio that combines the risk-free asset and the market portfolio has an expected return of 6.2 percent and a standard deviation of 9.2 percent. The risk-free rate is 3.2 percent, and the expected return on the market portfolio is 11.2 percent. Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a .37 correlation with the market portfolio and a standard deviation of 54.2 percent? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)The beta on risky asset A is 1.8 and the beta on risky asset Bis 1.1. The expected return on the market portfolio is 10% and the risk free rate of return is 4%. Consider a portfolio comprising the two riskypssets and the risk-free asset where you invest 50% in risky asset A and 30% in risky asset B. What is (i) the beta of a portfolio and fi) the expected return of the portfolio? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a None of the above b. (i) 0.97 and (ii) 9.829% (1) 1.23 and (ii) 9.8296 (1) 1.23 and (ii) 11.38% ) 0.97 and (ii) 11.38% eThe market portfolio has an expected 9.0% return and 20% standard deviation. The risk-free asset rate of return is 3.0%. Using these two assets a portfolio manager creates a new portfolio with 28.0% standard deviation. This portfolio expected return is: 9.0% 11.4% 8.0% Cannot create such a portfolio 12.6%