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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Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,350,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $3,310,000 in annual sales, with costs of $2,330,000. Assume the tax rate is 23 percent and the required return on the project is 11 percent. What is the project's NPV? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

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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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