ESSEN.OF.INVESTMENTS+CONNECT
10th Edition
ISBN: 9781260361605
Author: Bodie
Publisher: MCG
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Question
Chapter 7, Problem 20PS
Summary Introduction
(a)
To determine:
The spreadsheet of the given data and estimate the index model for full five-year period and compare the betas of each firm
Introduction:
The net loss or the net gain on any investment over a certain time period which is expressed as the investment's initial cost percentage is the
Expert Solution
Answer to Problem 20PS
The beta is 1.81, 0.86 and 0.71 for Ford, GM and Toyota respectively.
Explanation of Solution
Given Information:
The data is available in the given website for GM, Ford, Toyota, S&P 500 and Treasury bills.
The excel snippet given here shows the calculation of betas of GM, Ford, Toyota and S&P 500.
Here the beta for each of the companies is calculated for the five year period. The beta is obtained as:
For Ford, it is obtained using the formula in Excel SLOPE (G4:G63, $J$4:$J$63)
For GM, it is obtained using the formula in Excel SLOPE (H4:H63, $J$4:$J$63)
For Toyota, it is obtained using the formula in Excel SLOPE (I4:I63, $J$4:$J$63)
| Rates of Return | Excess rates of return | ||||||||
| Month | Ford | GM | Toyota | S&P | T-bills | Ford | GM | Toyota | S&P |
| Jan-04 | -5.44 | 0.56 | 4.11 | 1.28 | 0.07 | -5.51 | 0.49 | 4.04 | 1.21 |
| Feb-04 | -1.28 | 0.00 | 8.34 | -1.38 | 0.06 | -1.34 | -0.06 | 8.28 | -1.44 |
| Mar-04 | 13.92 | -3.19 | -1.74 | -1.98 | 0.09 | 13.83 | -3.28 | -1.83 | -2.07 |
| Apr-04 | -3.34 | 0.00 | -1.17 | 1.62 | 0.08 | -3.42 | -0.08 | -1.25 | 1.54 |
| May-04 | 5.36 | -0.25 | 12.81 | 1.79 | 0.06 | 5.30 | -0.31 | 12.75 | 1.73 |
| Jun-04 | -5.30 | 2.39 | -1.99 | -3.30 | 0.08 | -5.38 | 2.31 | -2.07 | -3.38 |
| Jul-04 | -4.12 | 1.69 | -1.01 | 0.15 | 0.1 | -4.22 | 1.59 | -1.11 | 0.05 |
| Aug-04 | -0.46 | 1.51 | -2.97 | 0.89 | 0.11 | -0.57 | 1.40 | -3.08 | 0.78 |
| Sep-04 | -6.48 | 0.08 | 1.59 | 1.18 | 0.11 | -6.59 | -0.03 | 1.48 | 1.07 |
| Oct-04 | 8.75 | -1.17 | -3.71 | 4.35 | 0.11 | 8.64 | -1.28 | -3.82 | 4.24 |
| Nov-04 | 3.26 | 1.97 | 9.59 | 2.86 | 0.15 | 3.11 | 1.82 | 9.44 | 2.71 |
| Dec-04 | -9.33 | -3.02 | -4.50 | -2.40 | 0.16 | -9.49 | -3.18 | -4.66 | -2.56 |
| Jan-05 | -3.97 | -0.24 | -0.53 | 1.93 | 0.16 | -4.13 | -0.40 | -0.69 | 1.77 |
| Feb-05 | -10.38 | -15.28 | -3.74 | -1.99 | 0.16 | -10.54 | -15.44 | -3.90 | -2.15 |
| Mar-05 | -18.74 | -7.84 | -2.25 | -2.08 | 0.21 | -18.95 | -8.05 | -2.46 | -2.29 |
| Apr-05 | 9.50 | 2.25 | -1.37 | 3.01 | 0.21 | 9.29 | 2.04 | -1.58 | 2.80 |
| May-05 | 2.65 | 4.91 | -0.31 | -0.09 | 0.24 | 2.41 | 4.67 | -0.55 | -0.33 |
| Jun-05 | 5.77 | 5.44 | 6.12 | 3.59 | 0.23 | 5.54 | 5.21 | 5.89 | 3.36 |
| Jul-05 | -7.12 | -8.88 | 8.07 | -1.17 | 0.24 | -7.36 | -9.12 | 7.83 | -1.41 |
| Aug-05 | -1.15 | -5.37 | 13.59 | 0.50 | 0.3 | -1.45 | -5.67 | 13.29 | 0.20 |
| Sep-05 | -14.54 | -7.77 | 0.48 | -2.65 | 0.29 | -14.83 | -8.06 | 0.19 | -2.94 |
| Oct-05 | -2.24 | -7.52 | 4.25 | 4.12 | 0.27 | -2.51 | -7.79 | 3.98 | 3.85 |
| Nov-05 | -5.08 | -4.31 | 8.13 | -0.50 | 0.31 | -5.39 | -4.62 | 7.82 | -0.81 |
| Dec-05 | 12.45 | 12.61 | -0.87 | 2.09 | 0.32 | 12.13 | 12.29 | -1.19 | 1.77 |
| Jan-06 | -7.14 | -3.43 | 3.05 | 0.22 | 0.35 | -7.49 | -3.78 | 2.70 | -0.13 |
| Feb-06 | -0.13 | 6.04 | 1.90 | 1.31 | 0.34 | -0.47 | 5.70 | 1.56 | 0.97 |
| Mar-06 | -11.42 | 1.23 | 7.56 | 0.89 | 0.37 | -11.79 | 0.86 | 7.19 | 0.52 |
| Apr-06 | 3.04 | 6.39 | -8.32 | -3.37 | 0.36 | 2.68 | 6.03 | -8.68 | -3.73 |
| May-06 | -3.23 | 5.18 | -2.60 | -0.17 | 0.43 | -3.66 | 4.75 | -3.03 | -0.60 |
| Jun-06 | -3.05 | 4.63 | 0.60 | 0.05 | 0.4 | -3.45 | 4.23 | 0.20 | -0.35 |
| Jul-06 | 25.49 | -1.41 | 2.97 | 1.78 | 0.4 | 25.09 | -1.81 | 2.57 | 1.38 |
| Aug-06 | -3.35 | 6.11 | 0.52 | 2.28 | 0.42 | -3.77 | 5.69 | 0.10 | 1.86 |
| Sep-06 | 2.35 | 3.60 | 8.36 | 2.75 | 0.41 | 1.94 | 3.19 | 7.95 | 2.34 |
| Oct-06 | -1.81 | 0.61 | 1.74 | 1.58 | 0.41 | -2.22 | 0.20 | 1.33 | 1.17 |
| Nov-06 | -7.63 | 0.52 | 11.88 | 0.35 | 0.42 | -8.05 | 0.10 | 11.46 | -0.07 |
| Dec-06 | 8.26 | 6.70 | -1.88 | 1.11 | 0.4 | 7.86 | 6.30 | -2.28 | 0.71 |
| Jan-07 | -2.71 | -0.16 | 1.38 | -2.40 | 0.44 | -3.15 | -0.60 | 0.94 | -2.84 |
| Feb-07 | -0.25 | -0.73 | -4.07 | 0.78 | 0.38 | -0.63 | -1.11 | -4.45 | 0.40 |
| Mar-07 | 1.90 | -0.08 | -5.26 | 3.99 | 0.43 | 1.47 | -0.51 | -5.69 | 3.56 |
| Apr-07 | 3.73 | 1.87 | -0.54 | 2.95 | 0.44 | 3.29 | 1.43 | -0.98 | 2.51 |
| May-07 | 12.95 | -0.24 | 4.24 | -1.87 | 0.41 | 12.54 | -0.65 | 3.83 | -2.28 |
| Jun-07 | -9.66 | -6.32 | -4.17 | -3.53 | 0.4 | -10.06 | -6.72 | -4.57 | -3.93 |
| Jul-07 | -8.23 | -4.78 | -4.10 | 0.88 | 0.4 | -8.63 | -5.18 | -4.50 | 0.48 |
| Aug-07 | 8.71 | 8.79 | 1.02 | 3.46 | 0.42 | 8.29 | 8.37 | 0.60 | 3.04 |
| Sep-07 | 4.48 | -0.25 | -2.07 | 1.03 | 0.32 | 4.16 | -0.57 | -2.39 | 0.71 |
| Oct-07 | -15.33 | -6.86 | -1.74 | -4.19 | 0.32 | -15.65 | -7.18 | -2.06 | -4.51 |
| Nov-07 | -10.39 | -5.59 | -5.58 | -1.47 | 0.34 | -10.73 | -5.93 | -5.92 | -1.81 |
| Dec-07 | -1.34 | 11.18 | 2.03 | -6.31 | 0.27 | -1.61 | 10.91 | 1.76 | -6.58 |
| Jan-08 | -1.66 | -3.13 | 0.21 | -2.79 | 0.21 | -1.87 | -3.34 | 0.00 | -3.00 |
| Feb-08 | -12.40 | -9.60 | -7.06 | -1.03 | 0.13 | -12.53 | -9.73 | -7.19 | -1.16 |
| Mar-08 | 44.41 | 8.78 | 0.60 | 4.60 | 0.17 | 44.24 | 8.61 | 0.43 | 4.43 |
| Apr-08 | -17.68 | -6.48 | 0.54 | 1.34 | 0.17 | -17.85 | -6.65 | 0.37 | 1.17 |
| May-08 | -29.26 | -15.56 | -7.89 | -8.52 | 0.17 | -29.43 | -15.73 | -8.06 | -8.69 |
| Jun-08 | -0.21 | -11.01 | -8.46 | -1.07 | 0.17 | -0.38 | -11.18 | -8.63 | -1.24 |
| Jul-08 | -7.08 | -4.92 | 4.11 | 1.40 | 0.15 | -7.23 | -5.07 | 3.96 | 1.25 |
| Aug-08 | 16.59 | -29.61 | -4.23 | -9.54 | 0.12 | 16.47 | -29.73 | -4.35 | -9.66 |
| Sep-08 | -57.88 | -13.77 | -11.32 | -16.67 | 0.15 | -58.03 | -13.92 | -11.47 | -16.82 |
| Oct-08 | 22.83 | -26.04 | -17.07 | -7.04 | 0.08 | 22.75 | -26.12 | -17.15 | -7.12 |
| Nov-08 | -14.87 | -25.44 | 3.71 | 0.97 | 0.02 | -14.89 | -25.46 | 3.69 | 0.95 |
| Dec-08 | -18.34 | 23.02 | -2.95 | -8.31 | 0.09 | -18.43 | 22.93 | -3.04 | -8.40 |
| Ford | GM | Toyota | S&P | ||||||
| Beta for 5 years | 1.81 | 0.86 | 0.71 | 1.00 |
Summary Introduction
(b)
Requirement 2 To Determine:
The betas for the firms for the first two years and for the last two years and to see how stable the betas obtained for these shorter subperiods are.
Introduction:
The net loss or the net gain on any investment over a certain time period which is expressed as the investment's initial cost percentage is the rate of return or ROR.
Expert Solution
Answer to Problem 20PS
The betas for first 2 years is 2.01, 1.05 and 0.47 for Ford, GM and Toyota respectively.
Explanation of Solution
Given Information:
The data is available in the given website for GM, Ford, Toyota, S&P 500 and Treasury bills.
The excel snippet given here shows the calculation of betas of GM, Ford, Toyota and S&P 500.
Here the beta for each of the companies is calculated for the first 2 year period. The beta is obtained as:
For Ford, it is obtained using the formula in excel SLOPE (G4:G27, $J$4:$J$27)
For GM, it is obtained using the formula in excel SLOPE (H4:H27, $J$4:$J$27)
For Toyota, it is obtained using the formula in excel SLOPE (I4:I27, $J$4:$J$27)
For the last two year period, the beta of the stocks is calculated as:
For Ford, it is obtained using the formula in excel SLOPE (G40:G63, $J$40:$J$63)
For GM, it is obtained using the formula in excel SLOPE (H40:H63, $J$40:$J$63)
For Toyota, it is obtained using the formula in excel SLOPE (I40:I63, $J$40:$J$63)
| Rates of Return | Excess rates of return | ||||||||
| Month | Ford | GM | Toyota | S&P | T-bills | Ford | GM | Toyota | S&P |
| Jan-04 | -5.44 | 0.56 | 4.11 | 1.28 | 0.07 | -5.51 | 0.49 | 4.04 | 1.21 |
| Feb-04 | -1.28 | 0.00 | 8.34 | -1.38 | 0.06 | -1.34 | -0.06 | 8.28 | -1.44 |
| Mar-04 | 13.92 | -3.19 | -1.74 | -1.98 | 0.09 | 13.83 | -3.28 | -1.83 | -2.07 |
| Apr-04 | -3.34 | 0.00 | -1.17 | 1.62 | 0.08 | -3.42 | -0.08 | -1.25 | 1.54 |
| May-04 | 5.36 | -0.25 | 12.81 | 1.79 | 0.06 | 5.30 | -0.31 | 12.75 | 1.73 |
| Jun-04 | -5.30 | 2.39 | -1.99 | -3.30 | 0.08 | -5.38 | 2.31 | -2.07 | -3.38 |
| Jul-04 | -4.12 | 1.69 | -1.01 | 0.15 | 0.1 | -4.22 | 1.59 | -1.11 | 0.05 |
| Aug-04 | -0.46 | 1.51 | -2.97 | 0.89 | 0.11 | -0.57 | 1.40 | -3.08 | 0.78 |
| Sep-04 | -6.48 | 0.08 | 1.59 | 1.18 | 0.11 | -6.59 | -0.03 | 1.48 | 1.07 |
| Oct-04 | 8.75 | -1.17 | -3.71 | 4.35 | 0.11 | 8.64 | -1.28 | -3.82 | 4.24 |
| Nov-04 | 3.26 | 1.97 | 9.59 | 2.86 | 0.15 | 3.11 | 1.82 | 9.44 | 2.71 |
| Dec-04 | -9.33 | -3.02 | -4.50 | -2.40 | 0.16 | -9.49 | -3.18 | -4.66 | -2.56 |
| Jan-05 | -3.97 | -0.24 | -0.53 | 1.93 | 0.16 | -4.13 | -0.40 | -0.69 | 1.77 |
| Feb-05 | -10.38 | -15.28 | -3.74 | -1.99 | 0.16 | -10.54 | -15.44 | -3.90 | -2.15 |
| Mar-05 | -18.74 | -7.84 | -2.25 | -2.08 | 0.21 | -18.95 | -8.05 | -2.46 | -2.29 |
| Apr-05 | 9.50 | 2.25 | -1.37 | 3.01 | 0.21 | 9.29 | 2.04 | -1.58 | 2.80 |
| May-05 | 2.65 | 4.91 | -0.31 | -0.09 | 0.24 | 2.41 | 4.67 | -0.55 | -0.33 |
| Jun-05 | 5.77 | 5.44 | 6.12 | 3.59 | 0.23 | 5.54 | 5.21 | 5.89 | 3.36 |
| Jul-05 | -7.12 | -8.88 | 8.07 | -1.17 | 0.24 | -7.36 | -9.12 | 7.83 | -1.41 |
| Aug-05 | -1.15 | -5.37 | 13.59 | 0.50 | 0.3 | -1.45 | -5.67 | 13.29 | 0.20 |
| Sep-05 | -14.54 | -7.77 | 0.48 | -2.65 | 0.29 | -14.83 | -8.06 | 0.19 | -2.94 |
| Oct-05 | -2.24 | -7.52 | 4.25 | 4.12 | 0.27 | -2.51 | -7.79 | 3.98 | 3.85 |
| Nov-05 | -5.08 | -4.31 | 8.13 | -0.50 | 0.31 | -5.39 | -4.62 | 7.82 | -0.81 |
| Dec-05 | 12.45 | 12.61 | -0.87 | 2.09 | 0.32 | 12.13 | 12.29 | -1.19 | 1.77 |
| Jan-06 | -7.14 | -3.43 | 3.05 | 0.22 | 0.35 | -7.49 | -3.78 | 2.70 | -0.13 |
| Feb-06 | -0.13 | 6.04 | 1.90 | 1.31 | 0.34 | -0.47 | 5.70 | 1.56 | 0.97 |
| Mar-06 | -11.42 | 1.23 | 7.56 | 0.89 | 0.37 | -11.79 | 0.86 | 7.19 | 0.52 |
| Apr-06 | 3.04 | 6.39 | -8.32 | -3.37 | 0.36 | 2.68 | 6.03 | -8.68 | -3.73 |
| May-06 | -3.23 | 5.18 | -2.60 | -0.17 | 0.43 | -3.66 | 4.75 | -3.03 | -0.60 |
| Jun-06 | -3.05 | 4.63 | 0.60 | 0.05 | 0.4 | -3.45 | 4.23 | 0.20 | -0.35 |
| Jul-06 | 25.49 | -1.41 | 2.97 | 1.78 | 0.4 | 25.09 | -1.81 | 2.57 | 1.38 |
| Aug-06 | -3.35 | 6.11 | 0.52 | 2.28 | 0.42 | -3.77 | 5.69 | 0.10 | 1.86 |
| Sep-06 | 2.35 | 3.60 | 8.36 | 2.75 | 0.41 | 1.94 | 3.19 | 7.95 | 2.34 |
| Oct-06 | -1.81 | 0.61 | 1.74 | 1.58 | 0.41 | -2.22 | 0.20 | 1.33 | 1.17 |
| Nov-06 | -7.63 | 0.52 | 11.88 | 0.35 | 0.42 | -8.05 | 0.10 | 11.46 | -0.07 |
| Dec-06 | 8.26 | 6.70 | -1.88 | 1.11 | 0.4 | 7.86 | 6.30 | -2.28 | 0.71 |
| Jan-07 | -2.71 | -0.16 | 1.38 | -2.40 | 0.44 | -3.15 | -0.60 | 0.94 | -2.84 |
| Feb-07 | -0.25 | -0.73 | -4.07 | 0.78 | 0.38 | -0.63 | -1.11 | -4.45 | 0.40 |
| Mar-07 | 1.90 | -0.08 | -5.26 | 3.99 | 0.43 | 1.47 | -0.51 | -5.69 | 3.56 |
| Apr-07 | 3.73 | 1.87 | -0.54 | 2.95 | 0.44 | 3.29 | 1.43 | -0.98 | 2.51 |
| May-07 | 12.95 | -0.24 | 4.24 | -1.87 | 0.41 | 12.54 | -0.65 | 3.83 | -2.28 |
| Jun-07 | -9.66 | -6.32 | -4.17 | -3.53 | 0.4 | -10.06 | -6.72 | -4.57 | -3.93 |
| Jul-07 | -8.23 | -4.78 | -4.10 | 0.88 | 0.4 | -8.63 | -5.18 | -4.50 | 0.48 |
| Aug-07 | 8.71 | 8.79 | 1.02 | 3.46 | 0.42 | 8.29 | 8.37 | 0.60 | 3.04 |
| Sep-07 | 4.48 | -0.25 | -2.07 | 1.03 | 0.32 | 4.16 | -0.57 | -2.39 | 0.71 |
| Oct-07 | -15.33 | -6.86 | -1.74 | -4.19 | 0.32 | -15.65 | -7.18 | -2.06 | -4.51 |
| Nov-07 | -10.39 | -5.59 | -5.58 | -1.47 | 0.34 | -10.73 | -5.93 | -5.92 | -1.81 |
| Dec-07 | -1.34 | 11.18 | 2.03 | -6.31 | 0.27 | -1.61 | 10.91 | 1.76 | -6.58 |
| Jan-08 | -1.66 | -3.13 | 0.21 | -2.79 | 0.21 | -1.87 | -3.34 | 0.00 | -3.00 |
| Feb-08 | -12.40 | -9.60 | -7.06 | -1.03 | 0.13 | -12.53 | -9.73 | -7.19 | -1.16 |
| Mar-08 | 44.41 | 8.78 | 0.60 | 4.60 | 0.17 | 44.24 | 8.61 | 0.43 | 4.43 |
| Apr-08 | -17.68 | -6.48 | 0.54 | 1.34 | 0.17 | -17.85 | -6.65 | 0.37 | 1.17 |
| May-08 | -29.26 | -15.56 | -7.89 | -8.52 | 0.17 | -29.43 | -15.73 | -8.06 | -8.69 |
| Jun-08 | -0.21 | -11.01 | -8.46 | -1.07 | 0.17 | -0.38 | -11.18 | -8.63 | -1.24 |
| Jul-08 | -7.08 | -4.92 | 4.11 | 1.40 | 0.15 | -7.23 | -5.07 | 3.96 | 1.25 |
| Aug-08 | 16.59 | -29.61 | -4.23 | -9.54 | 0.12 | 16.47 | -29.73 | -4.35 | -9.66 |
| Sep-08 | -57.88 | -13.77 | -11.32 | -16.67 | 0.15 | -58.03 | -13.92 | -11.47 | -16.82 |
| Oct-08 | 22.83 | -26.04 | -17.07 | -7.04 | 0.08 | 22.75 | -26.12 | -17.15 | -7.12 |
| Nov-08 | -14.87 | -25.44 | 3.71 | 0.97 | 0.02 | -14.89 | -25.46 | 3.69 | 0.95 |
| Dec-08 | -18.34 | 23.02 | -2.95 | -8.31 | 0.09 | -18.43 | 22.93 | -3.04 | -8.40 |
| Ford | GM | Toyota | S&P | |
| Beta for 5 years | 1.81 | 0.86 | 0.71 | 1.00 |
| Beta for frst 2 years | 2.01 | 1.05 | 0.47 | |
| Beta for last 2 years | 1.97 | 0.69 | 0.49 | |
| SE of residual | 12.01 | 8.34 | 5.14 | |
| SE beta 5 years | 0.42 | 0.29 | 0.18 | |
| Intercept 5 years | -0.93 | -1.44 | 0.45 | |
| Intercept 2 years | -2.37 | -1.82 | 1.8 | |
| Intercept last 2 years | 0.81 | -3.41 | -1.91 |
It is clear from the above table that there is a deviation in the sub-period approximation from the overall estimate. This deviation is more than 2 standard deviations. It is clearly evident in the case of Toyota where for the first two years; the intercept shows a positive value of 1.8 while for the last two years it is a negative value.
The results of Toyota are surprising as the negative performance is beyond the expectation from the index. This shows that 0.5 beta is more trustworthy.
The explanation of the behavior for GM and Ford are also on the same lines.
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Chapter 7 Solutions
ESSEN.OF.INVESTMENTS+CONNECT
Ch. 7 - Prob. 1PSCh. 7 - Consider the statement: “If we can identify a...Ch. 7 - Are the following true or false? Explain. (LO 7-5)...Ch. 7 - Here are data on two companies. The T-bill rate is...Ch. 7 - Characterize each company in the previous problem...Ch. 7 - What is the expected rate of return for a stock...Ch. 7 - Kaskin, Inc., stock has a beta of 1.2 and Quinn,...Ch. 7 - Prob. 8PSCh. 7 - What must be the beta of a portfolio with E(rf)) =...Ch. 7 - The market price of a security is $40. Its...
Ch. 7 - You arc a consultant to a large manufacturing...Ch. 7 - Consider the following table, which gives a...Ch. 7 - Prob. 13PSCh. 7 - Prob. 14PSCh. 7 - If the simple CAPM is valid, which of the...Ch. 7 - Prob. 16PSCh. 7 - If the simple CAPM is valid, which of the...Ch. 7 - Prob. 18PSCh. 7 - Prob. 19PSCh. 7 - Prob. 20PSCh. 7 - In problem 2123 below, assume the risk-free rate...Ch. 7 - Prob. 22PSCh. 7 - In problem 2123 below, assume the risk-free rate...Ch. 7 - Two investment advisers are comparing performance....Ch. 7 - Suppose the yield on short-term government...Ch. 7 - Based on current dividend yields and expected...Ch. 7 - Consider the following data for a single index...Ch. 7 - Assume both portfolios A and B are well...Ch. 7 - Prob. 29PSCh. 7 - Prob. 30PSCh. 7 - Et
Ch. 7 - Suppose two factors are identified for the U.S....Ch. 7 - Suppose there are two independent economic...Ch. 7 - As a finance intern at Pork Products, Jennifer...Ch. 7 - Suppose the market can be described by the...Ch. 7 - Which of the following statements about the...Ch. 7 - Kay, a portfolio n1anacr at Collins Asset...Ch. 7 - Prob. 3CPCh. 7 - Jeffrey Bruner, CFA, uses the capital asset...Ch. 7 - Prob. 5CPCh. 7 - According to CAPM, the expected rate of a return...Ch. 7 - Prob. 7CPCh. 7 - Prob. 8CPCh. 7 - 9. Briefly explain whether investors should expect...Ch. 7 - Assume that both X and Y are well-diversified port...Ch. 7 - Prob. 11CPCh. 7 - 12. A zero-investment, well-diversified portfolio...Ch. 7 - 13. An investor takes as large a position as...Ch. 7 - In contrast to the capital asset pricing model,...Ch. 7 - Prob. 1WMCh. 7 - Prob. 2WMCh. 7 - Prob. 3WMCh. 7 - a. Which of the stocks would you classify as...
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- Please help with problem 4-6arrow_forwardYour father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $45,000 has today. (The real value of his retirement income will decline annually after he retires.) His retirement income will begin the day he retires, 10 years from today, at which time he will receive 24 additional annual payments. Annual inflation is expected to be 5%. He currently has $180,000 saved, and he expects to earn 8% annually on his savings. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Required annuity payments Retirement income today $45,000 Years to retirement 10 Years of retirement 25 Inflation rate 5.00% Savings $180,000 Rate of return 8.00%arrow_forwardA textile company produces shirts and pants. Each shirt requires three square yards of cloth, and each pair of pants requires two square yards of cloth. During the next two months the following demands for shirts and pants must be met (on time): month 1, 2,000 shirts and 1,500 pairs of pants; month 2, 1,200 shirts and 1,400 pairs of pants. During each month the following resources are available: month 1, 9,000 square yards of cloth; month 2, 6,000 square yards of cloth. In addition, cloth that is available during month 1 and is not used can be used during month 2. During each month it costs $10 to produce an article of clothing with regular time labor and $16 with overtime labor. During each month a total of at most 2,000 articles of clothing can be produced with regular time labor, and an unlimited number of articles of clothing can be produced with overtime labor. At the end of each month, a holding cost of $1 per article of clothing is incurred (There is no holding cost for cloth.)…arrow_forward
- What is the general problem statement of the leaders lack an understanding and how to address job demands, resulting in an increase in voluntary termination? Refer to the article of Bank leaders discovered from customer surveys that customers are closing accounts because their rates are not competitive with area credit unions. Job demands such as a heavy workload interfered with employee performance, leading to decreased job performance.arrow_forwardDon't used hand raitingarrow_forward1 2 Fast Clipboard F17 DITECTIONS. BIU- Font B X C A. fx =C17+D17-E17 E F Merge & Center - 4 $ - % 9 4.0.00 Conditional Format as .00 9.0 Alignment Number Cell Formatting - Table - Table Styles - Styles Insert Delete Fe Cells H Mario Armando Perez is the kitchen manager at the Asahi Sushi House. Mario's restaurant offers five popular types of sushi roll. Mario keeps 4 careful records of the number of each roll type sold, from which he computes each item's popularity index. For March 1, Mario estimates 150 5 guests will be served. 6 8 9 10 11 04 At the end of the day, Mario also records his actual number sold in order to calculate his carryover amount for the next day. 7 Based on his experience, and to ensure he does not run out of any item, Mario would like to have extra servings (planned overage) of selected menu items available for sale. Using planned overage, the popularity index of his menu items, and his prior day's carryover information, help Mario determine the amount of new…arrow_forward
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