Your eccentric Aunt Claudia has left you $50,000 in BP shares plus $50,000 cash. Unfortunately, her will requires that the BP stock notbe sold for one year and the $50,000 cash must be entirely invested in one of the stocks shown below.BHP BillitonBPSiemensNestléSonySanofiAgricultural BankStandard deviation, %AgriculturalBHP Billiton BP1.00SiemensNestléSonySanofiBank0.440.21-0.050.210.150.241.000.400.240.270.360.271.000.260.330.290.211.000.340.27-0.061.000.270.351.000.171.0026.222.822.513.627.617.525.5a. Calculate the portfolio variance for seven different portfolios.Note: Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answers as adecimal rounded to 5 places.b. What is the safest attainable portfolio under these restrictions?Answer is not complete.Complete this question by entering your answers in the tabs below.Required ARequired BCalculate the portfolio variance for seven different portfolios.Note: Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answers as adecimal rounded to 5 places.PortfolioVariance

Portfolio variance refers to the method of measuring the risk associated with the securities in…

Answered: Your eccentric Aunt Claudia has left…

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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) Your firm has the following structure: you own all the shares of the Dixit paper cup company. Dixit has $2,000,000 of outstanding perpetual debt with a 10% coupon selling at par. Dixit is currently selling paper cups which produce earnings before interest of $210,000 per year. You receive the following offer from your engineer friend. He would help you liquidate Dixit’s assets and with the proceeds you could build solar powered scooters. Your financing would remain the same. You believe that there is a 75% chance that solar powered scooters would not be particularly successful. In this case they would generate only $100/year. However, there is a 25% chance that solar powered scooters would be very successful. In this case they would generate $500,000 per year. Assume your equity discount rate is 15%. Assume the firm pays no taxes. b) What is the value of the solar powered scooters investment assuming a 15% discount rate? c) What is the value of your equity under each of these…
Your eccentric Aunt Claudia has left you $50,000 in BP shares plus $50,000 cash. Unfortunately, her will requires that the BP stock not be sold for one year and the $50,000 cash must be entirely invested in one of the stocks shown below. BHP Billiton BP Siemens Nestlé Sony Sanofi Agricultural Bank Standard deviation, % Agricultural BHP Billiton BP 1.00 Siemens Nestlé Sony Sanofi Bank 0.44 0.21 -0.05 0.21 0.15 0.24 1.00 0.40 0.24 0.27 0.36 0.27 1.00 0.26 0.33 0.29 0.21 1.00 0.34 0.27 -0.06 1.00 0.27 0.35 1.00 0.17 1.00 26.2 22.8 22.5 13.6 27.6 17.5 25.5 a. Calculate the portfolio variance for seven different portfolios. Note: Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answers as a decimal rounded to 5 places. b. What is the safest attainable portfolio under these restrictions? Complete this question by entering your answers in the tabs below. Required A Required B Calculate the portfolio variance for seven different portfolios.…
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