Your portfolio consists of the following investment in stock with corresponding beta:P100,000 in a 0.8 beta stockP150,000 in a 1.2 beta stockP50,000 in a 1.8beta stockLast year, the required rate of return of this portfolio is13%. The quoted risk-free rate on the short-term BSPissued treasurybill is 7%. This year the only change noted is the increased by 2% on the market risk premium. What is the current requiredrate of return of this portfolio?а.6.14%b.7.84%С.15.33%d.16.75% The portfolio managerof CBS Inc. is holdingthe following investments:Stock NameBetaAmount InvestedСВС1.410,000PCCI120,000CIBI0.840,000The financialmanager plans to sellof Stock PCCI on which the proceeds from the sale will be used to purchaseanother P15,000 of Stock CBC and another P5,000 of Stock CIBI. The risk-free rate is 5% and the marketreturn is 10.5%. How many percentage points higherwill the required return on the portfolio be after hecompletes thistransaction?a.0.05%b.0.13%C.0.39%d.0.62%

We have the portfolio with different values of stocks and different betas. We need to calculate the…

Answered: Your portfolio consists of the…

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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6. You are given the following information: Return on three month T - bills - 6% Expected return on S&P 500 = 9% Draw the security - market line. Calculate the expected rate of return on a stock with a beta equal to 1.5.
Assume that the expected return and standard deviation of the company stock will be 17 percent, respectively. How appropriate is the sharpe ratio for these assets? When would you use the sharpe ratio?
A stock is expected to pay a dividend of $1.50 at the end of the year (i.e., D1 = $1.50), and it should continue to grow at a constant rate of 9% a year. If its required return is 14%, what is the stock's expected price 1 year from today? Do not round intermediate calculations. Round your answer to the nearest cent.
A share of stock with a beta of 0.8 currently sells for $50. Investors expect the stock to pay a year-end dividend of $5. The T-bill rate is 1%, and the market risk premium is 6%. If the stock is perceived to be fairly priced today, what much be investors' expectation of the price of the stock at the end of the year? $_ Hint: [CAPM] Expected Return (R) = Rf + Beta *Market Risk Premium; Expected Return (R) = Dividend Yield + Capital Gains Yield, where dividend yield=D1/PO and capital gains yield = (P1-Po)/PO
Based on the table below, you invested 40% on Stock A and B and 20% on Stock Calculate the expected return on this portfolio. Year Expected rate of returns Stock A Stock B Stock C 1 0.18 0.13 0.05 2 0.17 0.12 0.10 3 0.02 0.07 0.13 4 0.12 0.09 0.16 5 0.12 0.08 0.28 Please give the full step of the calculation.
Your portfolio consists of the following investment in stock with corresponding beta: · P200,000 in a 0.8 beta stock · P100,000 in a 1 beta stock · P100,000 in a 1.2 beta stock Last year, the required rate of return of this portfolio is 20%. The quoted risk-free rate on the short-term government issued security is 5%. This year the only change noted is the increased by 1% on the market risk premium. What is the current required rate of return of this portfolio
Queens Soliderate is considering two mutually exclusive projects. The firm, which has a 12% cost of capital, has estimated its cash flows as shown in the following table. Project A Project B Initial investment (CF0) $130,000 $85,000 Year (t) Cash inflows (CFt) 1 $25,000 $40,000 2 35,000 35,000 3 45,000 30,000 4 50,000 10,000 5 55,000 5,000 a. Calculate the NPV of each project, and assess its acceptability. b. Calculate the IRR for each project, and assess its acceptability. Required to answer. Single line text.
The spot price of a non-dividend paying stock is recorded as ₺100 at the close of the day. You estimate that this price is equally likely to go up by 11.1% or go down by 10% every two months and observe that the continuously compounded annual risk-free rate is 20% per year across all maturities. Use a multistep binomial tree together with the risk-neutral valuation approach to compute the theoretical price of a European put option written on this stock with a strike price of ₺80 and exactly six months until expiration
For a two-period binomial model, you are given: Each period is one year. The current price for a non dividend-paying stock is 20. u = 1.2840, where u is one plus the rate of capital gain on the stock per period if the stock price goes up. d = 0.8607, where d is one plus the rate of capital loss on the stock per period if the stock price goes down. The continuously compounded risk-free interest rate is 5%. Calculate the price of an American call option on the stock with a strike price of 22.
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A share of stock with a beta of 1.20 now sells for 55. Investors expect the stock to pay a year-end dividend of 2.90. The T-bill rate is 7 percent, and the market risk premium is 8 percent. If the stock is perceived to be fairly priced today,What must be investors’ expectations of the price of the stock at the end of the year?
Suppose you invest 70% of your fund in stock A and the other 30% in stock B. If stock A and B are expected to have the following returns next year, then what are the standard deviations for Stock A, Stock B and the portfolio returns respectively? Probability State of Economy Recession Boom 9.60%; 11.6% 12.60%; 14.2% 2.60%; 14.05% 9.60%; 7.80% .2 .8 Stock A -9% 18% Stock B 1% 3%

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