(Related to Checkpoint 7.1) (Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 3.8 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability 0.10 0.40 0.40 0.10 (Click on the icon in order to copy its contents into a spreadsheet.) Return - 6% 1% 6% 8% ... a. The investment's expected return is%. (Round to two decimal places.)

(Related to Checkpoint 7.1) (Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 3.8 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability 0.10 0.40 0.40 0.10 (Click on the icon in order to copy its contents into a spreadsheet.) Return - 6% 1% 6% 8% ... a. The investment's expected return is%. (Round to two decimal places.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3.0 and 3.5 years, respectively. Time: Cash flow: 1 2 -$236,000 $65,900 $84,100 $141,100 $122,100 $81,300 Use the IRR decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) IRR % Should it be accepted or rejected? O rejected accepted
Calculate Johnson & Johnson's capital asset price model. It is recommended to use treasury security as the risk-free rate - pick which one (It would probably be best to use the 5- or 10-year Treasury note). Beta can be either calculated or you can use one from the internet. Yahoo Finance lists the most current beta under “key statistics.” As for the risk for the market, search the most recent. Usually, it is around 5% to 6%.
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3 and 3.5 years, respectively. Time: Cash flow: 0 1 3 4 -$233,000 $65,600 $83,800 $140, 800 $121,800 MIRR Use the MIRR decision rule to evaluate this project. Note: Do not round intermediate calculations and round your final answer to 2 decimal places. 5 $81,000 %
A manager believes his firm will earn a return of 20.30 percent next year. His firm has a beta of 1.36, the expected return on the market is 15.90 percent, and the risk-free rate is 5.90 percent. Compute the return the firm should earn given its level of risk. (Round your answer to 2 decimal places.) Required return %
Consider an investment that pays off $700 or $1,400 per $1,000 invested with equal probability. Suppose you have $1,000 but are willing to borrow to increase your expected return. What would happen to the expected value and standard deviation of the investment if you borrowed an additional $1,000 and invested a total of $2,000? What if you borrowed $2,000 to invest a total of $3,000? Instructions: Complete the table below to answer the questions above. Enter your responses as whole numbers and enter percentage values as percentages not decimals (i.e., 23% not 0.23). Enter a negative sign (-) to indicate a negative number if necessary. Invest $1,000 Invest $2,000 Invest $3,000 Expected Value $ 1050 1200 $ $ 1300 Percentage 20 % 30 % 40 % Standard Deviation 300 600 900 Expected Return N/A Doubled Tripled
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3.0 and 3.5 years, respectively. Time: 0 1 2 3 4 5 Cash flow -$238,000 $66,100 $84,300 $141,300 $122,300 $81,500 Use the discounted payback decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Discounted payback Should it be accepted or rejected? O Rejected O Accepted years
Suppose you have a project that has a 0.6 chance of doubling your investment in a year and a 0.4 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) Answer is complete but not entirely correct. 40.99 Standard deviation %
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 9 percent, and that the maximum allowable payback and discounted payback statistics for the project are 2.0 and 3.0 years, respectively. Time: 0 1 2 3 4 5 6 Cash flow: −$7,100 $1,000 $2,200 $1,400 $1,400 $1,200 $1,000 Use the IRR decision rule to evaluate this project. (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.) Should it be accepted or rejected?multiple choice accepted rejected
(Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 4.6 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Return -4% 1% 6% 0.05 8% (Click on the icon in order to copy its contents into a spreadsheet.) Probability 0.05 0.35 0.55 a. The investment's expected return is 3.85%. (Round to two decimal places.) b. The investment's standard deviation is%. (Round to two decimal places.) C
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3.0 and 3.5 years, respectively. Time: 1 2 3 4 5 Cash flow: -$239,000 $66,200 $84,400 $141,400 $122,400 $81,600 Use the IRR decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) IRR % Should it be accepted or rejected? O accepted O rejected
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistics for your company are 2.5 and 3.0 years, respectively. Time: 0 1 2 3 4 5 Cash flow: −$362,000 $65,300 $83,500 $140,500 $121,500 $80,700 Use the PI decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Should it be accepted or rejected?multiple choice accepted rejected
You invest $5000 at time t=0 and an additional $2000 at time t=1/2. At time t=1/2 you have $5300 in your account and at time t=1 you have $7300 in your account. Find the dollar-weighted rate of return rd and the time-weighted rate of return rt on this investment.A. rd= 2.86 %, rt=3.43 %B. rd= 2 %, rt=2.4 %C. rd= 6.26 %, rt=7.5 %D. rd= 2.51 %, rt=3 %E. rd= 5.01 %, rt= 6 % Please answer it only correct without using Excel

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