A rational investor seeking to maximize return for a given level of risk would most likely choose to invest in: A) either company B) Koala LTD. C) Aardvark Industries

Use the basic equation for the CAPM to rework each of the following problems for above case. Case A) Find the required return for an asset with a beta of 0.9 when the risk-free rate and market return are 8% and 12% respectively. Case B) Find the risk-free rate for a firm with a required return of 15% and a beta of 1.25 when the market return is 14%. Case C) Find the market return for an asset with a required return of 16% and a beta of 1.1 when the risk-free rate is 9%. Case D) Find the beta for an asset with a required return of 15% when the risk-free rate and market return are 10% and 12.5% respectively.

Which of the following is needed to calculate a firm’s WACC?    A. the cost of carrying inventory    B. the amount of capital necessary to make the investment    C. the cost of preferred stock    D. the probability distribution of expected returns E. both b and c

Remember, the expected value of a probability distribution is a statistical measure of the average (mean) value expected to occur during all possible circumstances. To compute an asset’s expected return under a range of possible circumstances (or states of nature), multiply the anticipated return expected to result during each state of nature by its probability of occurrence. Consider the following case: James owns a two-stock portfolio that invests in Blue Llama Mining Company (BLM) and Hungry Whale Electronics (HWE). Three-quarters of James’s portfolio value consists of BLM’s shares, and the balance consists of HWE’s shares. Each stock’s expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Market Condition Probability of Occurrence Blue Llama Mining Hungry Whale Electronics Strong 0.25 27.5% 38.5% Normal 0.45 16.5% 22% Weak 0.30 -22%…

You are thinking about investing in either X corp, or Y corp. Based on the following market measures, which company could be the best option based on possible return of investment?   x y Price/Earnings Ratio 10.39 12.27 Earnings per Common Share 3.5 5.4 Divident Payout .464 .320

Total investment risk can be broken down into two types of risk. What are these two types of risk and which should NOT affect expected return? (b) A firm has a beta of 1.3. The expected market return is 12% and the risk-free rate is 2%. What should be the firm's equity cost of capital? Use CAPM

You are planning for your child's future and would like to set up a savings account for their college tuition. You suspect that you don't want to make a lump sum, so you decide to make equal monthly deposits. After calculating, you plan to have $100,000 in the account in 18 years. You found an account that gives 2% APR compounded monthly. Find the amount of your monthly deposits needed to obtain your projected future value.