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- An investor has $80,000 to invest in a CD and a mutual fund. The CD yields 8% and the mutual fund yields 7%. The mutual fund requires a minimum investment of $9,000, and the investor requires that at least twice as much should be invested in CDs as in the mutual fund. How much should be invested in CDs and how much in the mutual fund to maximize the return? What is the maximum return? To maximize income, the investor should place $ in CDs and $ in the mutual fund. (Round to the nearest dollar as needed.)The investment funds for your company includes the following: Stock $ Amount Invested Beta for Each Stock A $ 600,000 .8 B $ 1,800,000 1.4 C $ 2,400,000 1.7 D $ 700,000 -.6 E $ 3,000,000 1.1 You need to calculate the required rate of return for the investment. The market’s required return for Year 2020 is 12% and the risk free rate is 3% Show your work on the following: Calculate the average beta for the portfolio. Calculate the required rate of return for the entire portfolio. The CFO of your company is anticipating that the stock market will be decreasing in the near future. Please give a recommendation on which stock the company should sell and which stock the company should buy. The CFO also wants you to explain your answer.As a junior investment manager, your boss instructs you to help a client to invest $100,000for the next year. Particularly, you are asked to form an investment portfolio for the clientby investing in risk-free assets like 90-day bank bill and two stocks: A and B. Stock A hasa beta value of 0.8, an expected return of 7% and a standard deviation of 10%; and stockB has a beta value of 1.2, an expected return of 12% and a standard deviation of 15%.The correlation coefficient between the returns for the two stocks is 0. The risk-free rate is2%.(a) What is the expected return of the risky portfolio with the two stocks that has theleast amount of risk?(b) Suppose that the optimal risky portfolio with the two stocks has a weight of 53% inA and 47% in B, and has the expected return of 9.4% and standard deviation of8.8%. If this client is willing to take a risk measured by standard deviation of 5% forhis overall investment portfolio, how much would you recommend to the client toinvest in the…
- Formulate but do not solve the problem.The management of a private investment club has a fund of $200,000 earmarked for investment in stocks. To arrive at an acceptable overall level of risk, the stocks that management is considering have been classified into three categories: high-risk, medium-risk, and low-risk. Management estimates that high-risk stocks will have a rate of return of 16%/year; medium-risk stocks, 10%/year; and low-risk stocks, 6%/year. The investment in low-risk stocks is to be twice the sum of the investments in stocks of the other two categories. If the investment goal is to have an average rate of return of 9%/year on the total investment, determine how much the club should invest in each type of stock. (Assume that all the money available for investment is invested. Let x, y, and z denote the amount, in dollars, invested in high-, medium-, and low-risk stocks, respectively.) = 200,000 = z = .09(200,000)14. You are interested in an investment fund with an expected annual rate of return of 15% and a standard deviation of 12% a year. If you invest $2 million in this fund, what is 95% VaR? In other words, there is 95% confidence that you will not lose more than ( ) over one year. How much money should be in the parentheses? Assume that the returns on the fund follow a normal distribution.You are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecasts (in millions of dollars) for the project are as follows: Years Cash Flow 100 1-10 14 On the basis of the behavior of the firm's stock, you believe that the beta of the firm is 1.41. Assuming that the rate of return available on risk-free investments is 5% and that the expected rate of return on the market portfolio is 13%, what is the net present value of the project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions of dollars rounded to 2 decimal places.) Net present value million
- Rachel the chief financial officer of sunrise fruit snakcs, needed to determine the compnays projected cost of capital for next year, to do so , wshe needed to know the following infomraiont expect a) the proejcted equity level for next year b) the projected intereset rate on next years debt The projected debt level for next year D0 the projected cash balance for next yearConsider a no-load mutual fund with $325 million in assets and 13 million shares at the start of the year and with $375 million in assets and 14 million shares at the end of the year. During the year investors have received income distributions of $3 per share and capital gain distributions of $0.20 per share. Assuming that the fund carries no debt, and that the total expense ratio is 2%, what is the rate of return on the fund? Multiple Choice 16.95% 17.80% 26.45% The answer cannot be determined from the information given.An investor has $80,000 to invest in Certificates of Deposit (CD) and a mutual fund. The CD yields 7% and the mutual fund yields 8%. The mutual fund requires a minimum investment of $8,000 and the investor requires at least twice as much should be invested in CDs as in the mutual fund. How much should be invested in each to maximize the return? What is the maximum return? Show your work and explanations setting this problem up. Variables should clearly be defined. Show all your work.
- You are considering an investment in a mutual fund with a 5% load and an expense ratio of 0.75%. You can invest instead in a bank CD paying 3% interest. Required: a. If you plan to invest for 3 years, what annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Assume annual compounding of returns. b. What annual rate of return must the fund portfolio earn if you plan to invest for 6 years to be better off in the fund than in the CD? c. Now suppose that instead of a front-end load the fund assesses a 12b-1 fee of 0.50% per year. What annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Note: Do not round intermediate calculations. Round your answers to 2 decimal places.please make the answer clearFormulate a system of equations for the situation below and solve. A private investment club has $600,000 earmarked for investment in stocks. To arrive at an acceptable overall level of risk, the stocks that management is considering have been classified into three categories: high-risk, medium-risk, and low-risk. Management estimates that high-risk stocks will have a rate of return of 15% / year; medium-risk stocks, 10%/year; and low-risk stocks, 7%/year. The members have decided that the investment in low-risk stocks should be equal to the sum of the investments in the stocks of the other two categories. Determine how much the club should invest in each type of stock if the investment goal is to have a return of $60,000/year on the total investment. (Assume that all the money available for investment is invested.) high-risk stocks $ 24000 X medium-risk stocks low-risk stocks LA LA