..An investor owns a portfolio that includes a risk-free asset and shares of Amazon. The risk-free rate is 4% and the expected return on Amazon stock is 21%. What is the expected return on this portfolio, assuming that the investor allocates 25% of the wealth to the risk-free asset and the rest to Amazon stock?
Q: How many years would it take for a debt of $11,360 to grow into $14,239 if the annual interest rate…
A: The concept of TVM refers to the interest-earning capacity of money which makes money earned earlier…
Q: ← Melissa Cutt is thinking about buying some shares of EZLawn Equipment, at $46.30 per share. She…
A: Expected return refers to the minimum return that are to be earned by the investors over the amount…
Q: The following table shows the nominal returns on Brazilian stocks and the rate of inflation. Year…
A: Variables in the question: Year Nominal Return (%) Inflation…
Q: A company issued $1000 par value, 17-year bonds 2 years ago at a coupon rate of 6.8 percent. The…
A: Bonds refer to instruments that are issued by a company to raise debt capital from non-traditional…
Q: The slope of the security market line is the: Multiple Choice risk-free interest rate.…
A: Bond are debt instruments as they carry a fixed obligation.The bond holders are the ones who invest…
Q: Problem 7-2 Interest Payments (LG7-1) Determine the interest payment for the following three bonds.…
A: Bonds are paid interest payments each period and are generally paid semi annually and par value is…
Q: New parents wish to save for their newborn's education and wish to have $30,000 at the end of 19…
A: An annuity is regular payments deposited at regular intervals at a specified interest rate to reach…
Q: Anzio, Inc., has two classes of shares. Class B has 15 times the voting rights as Class A. If you…
A: The total votes can be found by adding the shares of company A and shares of company B according to…
Q: What is the price per share of the company's stock? (Do not round intermediate calculations and…
A: Terminal value is the estimated value of a business or an investment at the end of a business or an…
Q: The yield curve indicates that the two-year interest rate will be a function of what variables?…
A: In this question, we are required to determine the interest rate variables and impact caused by…
Q: Given the following information: Total assets = $2,000,000 Debt = 40%, Equity = 60% Cost of equity =…
A: WACC will be considered as the required return rate which is the average of the cost of capital when…
Q: You are interested in purchasing a bond maturing on November 1st, 2029. The bond pays semiannual…
A: Current price of bond is the price which can be paid for purchase of the bond. It is also called…
Q: Quantitative Problem: Barton Industries expects next year's annual dividend, D1, to be $2.50 and it…
A: Flotation cost is the cost required to raise money from the market and is the cost of…
Q: It is now January 1, 2021, and you are considering the purchase of an outstanding bond that was…
A: Time:30 yearsFace value:$1000Coupon rate:9.5%Call price: $1080Callable years: 5Price: $1080
Q: The price of a stock is $67. A trader sells 5 put option contracts on the stock with a strike price…
A: Stock price= $67Number of Put option=5Strike price= $70Option payoff =$4Option exercise price =$69
Q: Clint Ryder won a lottery that will pay him $2,000,000 after twenty years. Assuming an appropriate…
A: Present value is the equivalent value today of the future cash flow that would give same money in…
Q: You are considering borrowing $100,000 for 30 years at a compound annual interest rate of 9%. The…
A: When the borrower borrows a loan from the lender, he has to pay a rate of interest on the borrowed…
Q: For the below ME alternatives, which machine should be selected based on the AW analysis. MARR=10%…
A: Equivalent annual Cost is the cost of operating and maintaining an asset annually. It is also called…
Q: MetaAluminum Valley Financial Group is a financial services company that has been struggling this…
A: Current price of stock is the price which can be paid for purchase of the stock. It is also called…
Q: EDEF Company will issue $8,000,000 in 10%, 10-year bonds when the market rate of interest is 7%.…
A: Price of bond is the present value of coupon payments plus present value of face value that is paid…
Q: Assume you have a one-year investment horizon and are trying to choose among three bonds. All have…
A: Bonds can be defined as financial instruments of a loan nature where the issuer raises funds from…
Q: Jackson wants to buy a Corolla Cross 1.8 Hybrid by means of a financing plan. Th price is R481 700.…
A: Loans are paid by equal monthly installments that carry the payment for interest and payment for…
Q: 6-1. Your division is considering two projects with the following cash flows (in millions): 0 1…
A: NPV means Net present value.It is a capital budgeting technique used for making investment…
Q: Suppose Alcatel-Lucent has an equity cost of capital of 9.2%, market capitalization of $10.95…
A:
Q: You invested $1000 on stock Xtreme. One year later the value of your investment went down by $100.…
A: The "real" rate of return is the rate of return after adjusting for inflation.
Q: If the expected rate of inflation was 3% and the actual rate was 6.2%; the systematic response…
A: Security return is calculated by subtracting the initial price from the final price of the security…
Q: 0. If the interest rate in the United Kingdom is 8 percent, the interest rate in the United States…
A: IRP Arbitrage: A difference between the actual quoted forward exchange rate in the market and the…
Q: uppose a state of Iowa zero coupon bond will pay $1000 at par ten years from now with no annual…
A: Current price of bond is the price which can be paid for purchase of the bond. It is also called…
Q: Birch Company normally produces and sells 49,000 units of RG-6 each month. The selling price is $30…
A: Variables in the question:Selling price = $30 per unitVariable costs = $10 per unitFixed…
Q: Prepare an amortization schedule for a three-year loan of $96,000. The interest rate is 9 percent…
A: Loan installment is that which is paid by borrower to lender for a specified period of time. This…
Q: The table above shows the interest rates available from investing in mk free US Treasury securbes…
A: Present value illustrates the current value of a sum of money that will be received or paid in the…
Q: Billy Bob Corporation deposits $100.000 at the beginning of every quarter in a savings account for…
A: Sinking fund are created to purchase the equipment in the future and money is deposited based on the…
Q: You
A: The Apr( annual percentage rate) of 20% for credit card but because payments are made monthly, the…
Q: Compare the cost of the following lesing agreement with the finance charge on a loan for the same…
A: Finance cost:When it comes to managing your business's finances, one crucial aspect to consider is…
Q: How much can you own of an asset with 40% annualized volatility and Normal returns? Options A…
A: The value at risk is used to estimate the possible loss on an investment with a given degree of…
Q: Amount borrowed Interest rate Number of periodic payments per year Maturity (in years) Periodic…
A: The time value of money recognizes the idea that the value of an amount of money today differs from…
Q: You would like to estimate the weighted average cost of capital for a new airine business. Based on…
A: WACC refers to the profits that the company provides to all its stakeholders. It is calculated as…
Q: Michael owns a portfolio that consists of the following two bonds: • Bond A: $1,000 par value bond…
A: Bond duration:Duration takes into account both the coupon payments received and the final principal…
Q: Kinkead Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be −$10…
A: The DCF model is a valuation model that describes the value of the company as its current worth of…
Q: li has invested for nine months -25% compounded semiannual
A: In compounding there is interest on interest also including the principal amount of deposits due to…
Q: You want to have $50,000 in 5 years. How much must you deposit each QUARTER in an account paying 10%…
A:
Q: Which of the following is true of a fully amortized loan? A. The amount of the payment applied to…
A: A fully amortized loan is a loan in which we make periodic payments to pay off the loan. The…
Q: If the economy is normal, Charleston Freight stock is expected to return 16.5 percent. If the…
A: Expected return= Probability * ReturnVariance= Sum of( Squared deviation between return and expected…
Q: Problem 25-5 (Static) Suppose a U.S. investor wishes to invest in a British firm currently selling…
A: An exchange rate is the price at which one currency can be exchanged for another, and it has an…
Q: 25 A non-dividend-paying stock, currently priced at $125 per share, can either go up by $25 or down…
A: Here, Stock Price $ 125.00Strike Price $ 135.00Time to…
Q: Capstone Investments is considering a project that will produce cash inflows of $11,000 in 1 year,…
A: Present value refers to the current date value of the cash flow. Present value can be determined by…
Q: The Bruin's Den Outdoor Gear is considering a new 7-year project to produce a new tent line. The…
A: The objective of this question is to calculate the Net Present Value (NPV) of a new project that…
Q: Can you please help me understand this equation 12 divided by .04 = 300? I am hoping to understand…
A: Understanding the 4% Rule: The 4% Rule is a guideline used by many financial planners and retirees…
Q: A bond with a coupon rate of 11 percent sells at a yield to maturity of 13 percent. If the bond…
A: Macaulay duration show changes in prices of bonds with changes in interest rate in the market.…
Q: 15. In making loans to a single customer, commercial banks are not restricted to a maximum…
A: As per our guidelines we are supposed to answer only one question (if there are multiple questions…
Step by step
Solved in 3 steps
- You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its net are summarized below. Calculate the beta of the portfolio and use the capital asset pricing model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 18% and that the risk-free rate is 6%. Stock A, Investment = $188,000, Beta=1.50, Stock B, Investment = $282,000, Beta =0.50, Stock C, Investment = $470,000, Beta = 1.30 Beta of the portfolio ? Expected rat of return ? %Jack has $100,000 invested in a 2-stock portfolio. $35,000 is invested in Stock X and the remainder is invested in Stock Y. X's beta is 1.50 and Y's beta is 0.70. What is the portfolio's beta? show work in in excel to better understand How is Beta measured and what does it tell us about the risk of the asset?You own a portfolio that has $2,800 invested in Stock A and $3,900 invested in Stock B. Assume the expected returns on these stocks are 9 percent and 15 percent, respectively. What is the expected return on the portfolio? (
- You want your portfolio beta to be 1.30. Currently, your portfolio consists of $100 invested in stock A with a beta of 1.4 and $300 in stock B with a beta of .6. You have another $400 to invest and want to divide it between an asset with a beta of 1.8 and a risk-free asset. How much should you invest in the risk-free asset?A portfolio consists of assets with the following expected returns (refer to image): a. What is the expected return on the portfolio if the investor spends an equal amount on each asset? b. What is the expected return on the portfolio if the investor puts 50 percent of available funds in technology stocks, 10 percent in pharmaceutical stocks, 24 percent in utility stocks, and 16 percent in the savings account?You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below. Stock Investment Beta A $222,000 1.41 B 333,000 0.53 C 555,000 1.30 Calculate the beta of the portfolio and use the Capital Asset Pricing Model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 12 percent and that the risk-free rate is 7 percent. (Round beta answer to 3 decimal places, e.g. 52.750 and expected rate of return answer to 2 decimal places, e.g. 52.75%.) Beta of the portfolio enter the beta rounded to 3 decimal places Expected rate of return enter percentages rounded to 2 decimal places %
- Suppose you hold a diversified portfolio consisting of a $4,000 investment in each of 14 different common stocks. The portfolio beta is 1.30. You decide to sell one of the stocks in your portfolio with a beta equal to 0.8 for $3,500 and use these proceed to buy another stock for your portfolio. Assume the new stock’s beta is equal to 1.75. Calculate your portfolio’s beta.Suppose you invest $100, $410, and $640 of your wealth into a stock, the market, and a risk - free asset, respectively. The beta of the stock is 1.3. What is the beta of the portfolio? Enter your answer rounded to 3 DECIMAL PLACES. Enter your response below.You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.25 and an expected return of 15%. The other stock has an expected return of 21%. The total portfolio is equally as risky as the market (i.e.Bp=1). What is the beta for the other stock in your portfolio? What is the expected return of the risk-free asset? What is the expected return of the market? What is the expected return of your portfolio?
- Suppose you hold a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio beta is equal to 1.12. Now, suppose you have decide to sell one of the stocks in your portfolio with a beta equal to 1.0 for 7,500 and to use these proceeds to buy another stocks for your portfolio. Assume the new stocks beta to 1.75. Calculate your portfolios new beta.An investor has $1000 initial wealth for investment and he borrows another $500 at the risk free rate. He then invest the entire total amount of $1500 in the market portfolio. What is his portfolio beta?You own a portfolio that has a total value of $215,000 and invested it is invested in Stock D with a beta of .86 and Stock E with a beta of 1.39. The beta of your portfolio is equal to the market beta. What is the dollar amount of your Investment in Stock D?