Adequate information: Expected rate of return of risky asset =18% Standard deviation of the risky asset=28% T-bill rate is 8% Client wants to invest in your portfolio in the proportion Y Overall portfolio’s expected rate of return =16% To compute: The proportion of Y Introduction: Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

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Answer 1

Question

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

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(d) Estimate the value of a share of Cisco common stock using the discounted cash flow (DCF) model as of July 27, 2019 using the following assumptions Assumptions Discount rate (WACC) Common shares outstanding 7.60% 5,029.00 million Net nonoperating obligations (NNO) $(8,747) million NNO is negative, which means that Cisco has net nonoperating investments CSCO ($ millions) DCF Model Reported 2019 Forecast Horizon 2020 Est. 2021 Est. 2022 Est. 2023 Est. Terminal Period Increase in NOA FCFF (NOPAT - Increase in NOA) $ 1241 1303 1368 10673 11207 11767 1437 $ 12354 302 ✓ Present value of horizon FCFF 9918 9679 9445 ✔ 0 × Cum. present value of horizon FCFF $ 0 × Present value of terminal FCFF 0 ☑ Total firm value 0 ☑ NNO -8747 ✓ Firm equity value $ 0 ☑ Shares outstanding (millions) 5029 Stock price per share $ 40.05

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Answer 2

Question

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

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Answer 3

Question

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

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Answer 4

Question

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

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Answer 5

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 6

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 7

Chapter 6, Problem 17PS

a

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client wants to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The proportion of Y

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 8

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 9

b

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: TheClient’s investment proportion in available three stocks and T-bill fund.

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 10

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 11

c

Summary Introduction

Adequate information:

Expected rate of return of risky asset =18%

Standard deviation of the risky asset=28%

T-bill rate is 8%

Client decides to invest in your portfolio in the proportion Y

Overall portfolio’s expected rate of return =16%

To compute: The standard deviation of the rate of return of client’s portfolio

Introduction:

Portfolio proportion: The calculation of portfolio proportion is simple. We have to divide each item of the stock position’s cash value by the complete or total portfolio value. This value is to be multiplied with 100 to get the value in percentages. This calculation is done to measure the dependence of the portfolio performance on each individual available stock.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 6.A - Prob. 1P Ch. 6.A - Prob. 2P Ch. 6 - Prob. 1PS Ch. 6 - Prob. 2PS Ch. 6 - Prob. 3PS Ch. 6 - Prob. 4PS Ch. 6 - Prob. 5PS Ch. 6 - Prob. 6PS Ch. 6 - Prob. 7PS Ch. 6 - Prob. 8PS

Solution Summary: The author explains how to calculate the proportion of Y by dividing each item of the stock position’s cash value by the complete or total portfolio value.

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