rrent Attempt in Progress State of the Economy Recession Average Boom Probability of Occurrence O 0.96 O -0.26 35% 45% 20% What is the correlation between stocks X and Z? Stock X Expected Return 25% 14% 4% Stock Y Expected Return -10% 8% 14% Stock Z Expected Return 15% 25% -10%

Q: What is the variance and standard deviation of 10%, (15%), 25%, 17%, 3% ?

A: In this question, we are required to determine variance and standard deviation.

Q: Bermuda Cruises issues only common stock and coupon bonds. The firm has a debt-equity ratio of 1.41.…

A: The objective of the question is to find the capital structure weight of the firm's equity. The…

Q: Jill's Wigs Inc. had the following balance sheet last year: Cash Accounts receivable Inventory Net…

A: Outside capital refers to the amount of money that is raised by using external sources. These mainly…

Q: What is the standard deviation of an efficient portfolio with a 21.4-percent expected rate of…

A: ERP : 21.4%R(f): 6.4%ERM: 9.4%σM: 25.4%

Q: You are considering two investment alternatives. The first is a stock that pays quarterly dividends…

A: HPR= (Income+Value at end of holding period-Value at the start of holding period)/Value at the start…

Q: Calculate the correlation coefficient (P) for the following situation: (Round intermediate…

A: A correlation coefficient is a statistical measure that quantifies the strength and direction of the…

Q: Alec, Daniel, William, and Stephen decide today to save for retirement. Each person wants to retire…

A: Future value refers to the estimated value of an asset or investment at a specified date in the…

Q: resident Company purchased merchandise from Captain Corporation on September 30, 2024. Payment was…

A: The annual payment of loan is $4200 beginning on September 30, 2027.The purchase made on September…

Q: Portfolio rebalancing is the process of bringing your different asset classes (stocks, bonds, and…

A: Variables in the question: Asset ClassBeginning Investment ProgramOne Year…

Q: ou have just signed for a car loan with 48 monthly payments of $500 (principal and interest) at an…

A: First we need to use loan amortization formula below to calculate loan amount.wherePV = loan…

Q: A bond that settles on June 7, 2016, matures on July 1, 2036, and may be called at any time after…

A: Yield to maturity can be calculated by following function in excel=RATE (nper, pmt, pv, [fv],…

Q: Security A B C Beta 0.8 1.0 1.2 Expected Return 10% 12% 14% Residual standard deviation 25% 10% 20%…

A: According to Single Index model , Variance of stock is calculated as follows:-Variance of stock =…

Q: Suppose today is Dec 31st 2018. The stock of Alliant Energy Corp. will pay a dividend of $0.36 every…

A: Current Stock Price= Sum of the Present Values of the Quarterly Dividends + Present Value of the…

Q: A loan of amount $33300 is to be repaid in payments that each consist of a principal repayment of…

A: Interest refers to an amount that is paid every time along with the principal payment for the…

Q: Carnes Cosmetics Co.'s stock price is $37, and it recently paid a $1.50 dividend. This dividend is…

A: Price of stock is the present value of future dividends and value received in the future discounted…

Q: fank made payments of $161 per month at the end of each month for 30 years to purchase a piece of…

A: Yield to maturity can be calculated by following function in excel=RATE (nper, pmt, pv, [fv],…

Q: (Profitability analysis) Last year Triangular Resources earned $4.5 million in net operating income…

A: Investment in total assets can be calculated by using the following ratiosOperating profit margin =…

Q: Fun Land is considering adding a miniature golf course to its facility. The course would cost…

A: Net present value(NPV)  is the difference  between present value of all cash inflows and initial…

Q: 28. A company has common stock which is expected to have a dividend of $2.59 at the end of year 5.…

A: The common stock is an equity-based instrument that allows the investors to participate in the…

Q: would be in the 24% federal marginal tax bracket. How much will she pay in income taxes on the…

A: ROTH IRA are retirement plan in which amount of deposit are done after paying adequate taxes and…

Q: Which of the following would offer the best return on investment? Assume that you buy $5,000 in…

A: Return on investment is used to evaluate the profitability and effectiveness of a company or an…

Q: Ronald has an investment opportunity that promises to pay him $45,000 in five years. He could earn a…

A: Present value refers to the current date value of all future cash flows discounted at the interest…

Q: The current one-year Treasury bill rate is 0.48 percent and the expected one-year rate 12 months…

A: Treasury Bills are issued by federal goverment for giving liquidity to the system.Current rate on…

Q: Green Foods currently has $550,000 of equity and is planning an $220,000 expansion to meet…

A: Return on equity is computed as follows:-Return on equity =

Q: You are a pension fund manager who has obligations over the years to come of: t: 2 CF: 11.5 2.5 The…

A: Here, YearCash Inflow1 $            7.002 $          11.503 $            2.504 $            6.50

Q: Boca Incorporated and Davie Corporation are two mutually exclusive projects: A B time 0 1 2 3 4…

A: IRR is the required rate of return for the project to have zero Net Present value.IRR can be…

Q: You bought 2 0 year bonds which has a total Face Value of 5 , 0 0 0 , 0 0 0 and has a coupon rate of…

A: Bond yield refers to the rate of return at which bond generates the income from the bond.It has an…

Q: Yellow Day has a project with the following cash flows: Year Cash Flows 0 -$ 26,700 1 10,400 2…

A: Future value can be calculated usingFV = PV* (1 + r / n)ntWhere,PV = Present valueFV = Future valuer…

Q: The New Word Corporation has 1,000,000 shares outstanding at $30/share. If the firm wishes to raise…

A: The entire number of stock shares that investors now own and may trade on the open market is known…

Q: To achieve a zero standard deviation for a portfolio, calculate the weights of stock A and stock B,…

A: The expected return of the stock is computed by multiplying the probability of each economy with the…

Q: Compare the alternatives shown on the basis of their capitalized costs using a MARR of 10% per year.…

A: Alternative M:First cost= -$150000Annual cost= -$80000Salvage value= $8000Life(n)= 5…

Q: Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $1.25 at…

A: We need to use constant growth model to calculate expected rate of returnP0 = D1/(rs- g)where D 1…

Q: The LIBOR zero curve is flat at 5% per year with continuously compounded out to 1.5 years. The swap…

A: Here,LIBOR for 1.5 years is 5%Swap Rate for 2 year semi annual pay swap is 5.4%

Q: Cardinal Company is considering a five-year project that would require a $2,945,000 investment in…

A: The profitability index is used to determine the attractiveness of an investment. It is computed by…

Q: What is the equivalent AW of a one-year contract that pays $6,000 in the first month and increases…

A: AW is the annual equivalent value of a contract and that would be the future value of all monthly…

Q: lly Thornton borrowed $145,000 at a rate of 7.25%, simple interest, with interest paid at the end of…

A: Simple interest is quite simple and there is interest on loan amount only and there is no interest…

Q: How long do the following options have before they expire? Call Price = $5 Put Price = $9 Stock…

A: The put-call parity refers to the relationship that exists between the prices of the call and the…

Q: A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a…

A: Expected return of portfolio willl be calculated as follows:-Rp = (Rs*Ws)+(Rb*Wb)whereRp= Expected…

Q: Suppose a project has the following cashflows and the discount rate (required return) is 12%. t 0 1…

A: The discounted payback period refers to the time it takes for the cash flows, that have been…

Q: Use the option quote information shown here to answer the questions that follow. The stock is…

A: A put option is a financial contract that gives the holder (the buyer) the right, but not the…

Q: You have an opportunity to acquire a property from First Capital Bank. The bank recently obtained…

A: Here,Cost of Property $       296,000.00Acquisition Expenses $         12,100.00Monthly Repairing…

Q: Calculate the MIRR of the project using all three methods with these interest rates. Note: Do not…

A: MIRR is the price in an investment plan that equalizes the most recent cash inflow with the most…

Q: The stock-sales ratio in the men's department has been set at 3.4 for June. Sales are planned at…

A: In this question, we are required to determine the BOM stock for June.

Q: (Liquidity analysis) When firms enter into loan agreements with their bank, it is very common for…

A: Current ratio shows the working capital required and it shows the liquidity of the company and it is…

Q: Lai Xiaodong, a 22-year-old college-educated man, accepted a job at Foxconn Technology (where the…

A: Lai's hourly gross pay = Lai's daily pay / No of hours of work per dayLai's Weekly Gross pay =…

Q: Sunburn Sunscreen has a zero coupon bond issue outstanding with a face value of $11,000 that matures…

A: A popular mathematical method in finance for pricing European-style options is the Black-Scholes…

Q: Mom's Cookies, Incorporated, is considering the purchase of a new cookie oven. The original cost of…

A: Project cash flows refer to the estimated cash inflows and outflows associated with a particular…

Q: You purchase a zero coupon bond with 12 years to maturity and a yield to maturity of 4.93 percent.…

A: Zero coupon bonds are not given any coupon but are issued at discount and discount is implicit…

Q: a. Suppose that between the ages of 22 and 36, you contribute $9000 per year to a 401(k) and your…

A: My contribution = $9,000Employer contribution = $4,500Total contribution=$9,000+$4,500=$13,500Number…

Q: You have just completed a $23,000 feasibility study for a new coffee shop in some retail space you…

A: Relevant initial cash flows refer to the cash outflows and inflows that occur at the beginning of a…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.