Required: a) Calculate the expected return on this portfolio. b) What is the Beta of this portfolio? c) Does this portfolio have more or less systematic risk than an average asset?
Q: Stephanie Carter has been gifted a sum of $50,000 by her grandparents on completing her graduation…
A: Stephanie Carter has tried to put together her investment philosophy and the possible investment…
Q: The Finishing Touch is a boutique that specializes in ladies accessories, such as purses, scarves,…
A: As the demand for Purse is linear, this means that with 22% decrease in price, demand will increase…
Q: Brown Mack Ltd currently has two large manufacturing divisions that share a single plant. Brown Mack…
A: Overheads are the indirect expenses that are incurred in the business. They are allocated on…
Q: What is the Current Yield of a Bond selling at $1,120 and has a Coupon Rate of 7%? 7%…
A: Solution:- Current Yield means the percentage of coupon amount to the current market price of bond.…
Q: In order to qualify for a $100,000 fully amortizing mortgage loan with a 15 year term, the borrower…
A: We have to find the buydown payment that will help the borrower keep the monthly mortgage payment…
Q: A man owes P50,000.00 with interest at 9% payable semi-annually. What equal payments at the…
A: Semi-annual repayment is a payment made every six months to repay the debt amount with a certain…
Q: A long-term investor has recently become concerned that the shares of a large stock holding will…
A: Good till cancel order is a type of order, in which order will not get cancelled until the order is…
Q: Which statement best describes the concept of risk? A) Under a situation of risk, future outcomes…
A: When you invest money than there is uncertainty related and not sure how much you would earn or how…
Q: trader submits a market to sell 900 shares. The buy limit orders standing in the stock's order book…
A: In the given case, Trader to sell 900 shares. Sell order can only be executed at the limit price or…
Q: d. Find the amount of 32,100 invested for 4 years and 3 months at 18% compounded: aa). monthly bb).…
A: Here, Invested amount (PV) = 32,100 Time period (NPER) = 4.25 years Interest rate (RATE) = 18%…
Q: A Zambian company has a bond outstanding that sells for 87 percent of its K100,000 par value. The…
A: As per Bartleby guidelines, If multiple questions are posted, only the first 1 question will be…
Q: 2. The purchased price of the equipment is P12,000 and its estimated maintenance costs are P500 for…
A: Present value of future amount With capitalized cost (r), period (n) and future value (FV), the…
Q: A firm's target capital structure is as follows: Debt 35% Preferred Stock 15% Common Stock 50% The…
A: Given: Particulars Debt Common stock Preferred stock Weight 35% 50% 15% Face value $1,000…
Q: Stag Company will pay dividends of $9.6, $5.9, $9.7 and $10 for the next four years. Thereafter, the…
A: To Find: Current market price of the share
Q: determine the structure of prices of the forward unitary zero coupon bonds.
A: Zero coupon bonds are bonds that are issued at a discount (price lower than par value). At maturity,…
Q: A Japanese company has a bond outstanding that sells for 94 percent of its ¥100,000 par value. The…
A: Par value = 100,000 Current price = 100,000 * 0.94 = 94,000 Annual coupon amount = 6100 (i.e.…
Q: Eastpac Bank's balance sheet has the following information: Assets Duration Book Value Market Value…
A: Answer is 8. Please see screenshot in Next Step
Q: reservation point?
A: Reservation point is the minimum point which the party will accept a agreement. It is always denoted…
Q: What is the IRR for a $1500 investment that returns $300 at the end of each of the next a.7 years?…
A: IRR of a project is the discount rate which makes net present value of the project equals to zero.…
Q: ppose that Federal Reserve actions have caused an increase in the risk-free rate, rRF. Meanwhile,…
A: The required rate of return as per capital asset pricing model = (Risk free rate+(beta*market risk…
Q: Company Miami just paid annual dividend of $25 today. The dividend is expected to grow at 8% for the…
A: Solution:- Dividend Discount Model (DDM) is the model to calculate stock price of a company by…
Q: Consider a piece of equipment for which the expenditure at the beginning of period 1 is $20,000 The…
A:
Q: What was the firm's net income if the firm paid income taxes of $2,000 and the average tax rate was…
A: Tax rate – 25% Tax paid – 2000 Net income - ? Tax = income before tax* tax rate
Q: Increasing the cost of borrowing shares most likely: Enhances market efficiency. Has no impact on…
A: Market is considered as efficient only if: Intrinsic Value = Stock price Stock prices fully relects…
Q: You, as a real estate agent, sell a property for $225,000.
A: Sale Price: $2,25,000 Commission Rate = 6% Real Estate Agent Commission:
Q: next 12 years. If the profits wil compounded continuously, what is the 12-year present value of this…
A: Information Provided: Year 0 Profit = $393,000 Decline in profit annually = 4% Interest rate = 7%…
Q: Connor wins $13,000 on a game show, and decides to save the money toward a down-payment on a house.…
A: Amount of lottery is $13,000 Time period is 3 years Interest rate is 4.8% Compounded Semi annually…
Q: You are called in as a financial analyst to appraise the bonds of Olsen's Clothing Stores. The…
A: To Find: Price of the bond
Q: Prepare an amortization schedule for a three-year loan of $87,000. The interest rate is 10 percent…
A: Loans are equal and fixed amount of periodic payments and these payments carry the payment for…
Q: .) If $25,000 is deposited in an account that earns interest compounded monthly becomes $32,000…
A: (Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…
Q: A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a…
A: The minimum variance portfolio is the portfolio consisting of risky assets where the investor…
Q: Common stock valuation) Abercrombie & Fitch's common stock pays a dividend of 2.75. It is…
A: Dividend growth Model - As per dividend growth Model current price per share can be calculated as…
Q: M2
A: The growth in the usage of crypto currency has promoted the government to take note of it and…
Q: All the securities below have annual payments. [Do not round interim calculations] Security…
A: The coupon rate is the interest rate used to determine the periodic payments to be made to…
Q: Find the monthly amortization for a loan of Mr. Frederick Dizon amounting to P750,000 to aid in four…
A: This is a case in which a loan is taken and then the payments are spread over a number of months.…
Q: What is the APR for a fed ra
A: APR means annual percentage rate. APR means the borrowing cost incurred by the borrower for a…
Q: 1. Rose Meat shop obtains a loan of P150,000 from a lending company based on a simple interest rate…
A: Here, Loan amount = P150,000 Interest rate = 10.25% Time period = 2 years To Find: Part A. Interest…
Q: 1. Calculate the APR (assume P-$100, -1 year) for each account. Round to 2 decimal places, in…
A: Using the formula below we can determine the effective annual interest rate for compounding monthly…
Q: I am going to invest $30,000 in a product that will generate a daily return of one to two…
A: The future value of money: The amount of money that is avalable from an investment at the end of the…
Q: Boomerang Bungee Corp. is considering the following project. Determine the equal annual annuity for…
A: We need to find the equivalent annuity. Mathematically we need to find that cash inflow that will…
Q: At the time of her grandson's birth, a grandmother deposits $9000 in an account that pays 8%…
A: We will use the below formula to calculate the future value Future value = PV*(1+r)n Where PV -…
Q: What are the 2 most common intent of international financial organization? Explain why it is…
A: Financial institutions include all banks, trust companies, savings banks, commercial banks, land…
Q: You are considering a stock investment in one of two firms (NoEquity, Inc., and NoDebt, Inc.), both…
A: Return on Asset = This ratio indicates that how a company manage its asset to generate revenue for…
Q: Assume you have $9000 to invest; A stock is trading at $90.00. A call option that expires in one…
A: As the portfolio's investment is made in stocks only, return on portfolio is calculated as the…
Q: You are financing a car worth $66050.54 with tax included. Interest rates are 12.7% compounded…
A: Given: Particulars Amount Car worth 66050.54 Interest rate 12.70% Years 3 Down payment…
Q: Given the following information, compute accounts receivable turnover: Gross sales…
A: Gross sales = $150000 Net sales = $135000 Opening accounts receivable = $18,000 Ending accounts…
Q: The Lee family is buying a new 3,500-square-foot house in Muncie, Indiana, and will borrow $237,100…
A: The periodic payment is the equal amount of payment at regular intervals. The periodic payment…
Q: As a financial consultant, you are given the following information about two companies, one levered…
A: Concept. 1.Value of firm = net income ÷ cost of capital(WACC) 2. Value of firm = value of debt +…
Q: Interest rates on 1-year, 2-year, and 3-year Treasury bills are 5%, 6%, and 7%, respectively. Assume…
A: Pure expectation theory According to pure expectation theory, the forward rates that can be…
Q: Explain any four ways that render a contract voidable
A: Voidable contract: A formal agreement between two parties which may not be enforceable due to…
Step by step
Solved in 4 steps
- Question 4 (Risk & Return and Equity Valuation) (a) Donald is considering the merits of two securities. He is interested in the common shares of A Co. and B Inc. The expected monthly rate of return of securities is shown below: State of Affair Probability Boom 0.1 Normal 0.5 Recession 0.4 Stock A Stock B 40% -20% 20% 8% -10% 15% At the time of purchase, the market value is $70/share for A and $50/share for B. Donald plans to invest 10,000 shares of Stock A and 6,000 shares in Stock B. (i) Compute the portfolio weights of Stock A and Stock B. (ii) Compute the expected returns of Stock A and Stock B. (iii) Assume that the covariance between Stock A and Stock B is -28%2 (0.0028). Compute the expected rate of return and variance of rate of return of Donald’s portfolio. (iv) If the risk-free rate is 2%, the market risk premium is 18% and the beta of Stock A is 0.75, estimate the required and expected rates of return of Stock A. Should Donald invest in Stock A?…Subject: Financial strategy & policy Question No 3 (part ii) Answer the following. ii) XYZ Industries plans to issue perpetual preferred stock with an $11.00 dividend. The stock is currently selling for $97.00; but flotation costs will be 5% of the market price per share. What is the cost of the preferred stock, including flotation?Consider two stocks: Stocks Current Price Possible Prices after one year Stock ABC $12.00 ABC + = $13.60 ABC – = $11.20 Stock XYZ $10.00 ABC + = $11.75 ABC – = $8.80 Assume a risk-free borrowing and lending rate is 5.20% and that neither stock pays dicidends, and a fractional shares can be bought and sold. Question: 1. Do you see that there opportunity to profit in this case? If so, how can that opportunity be realized? Explain your answer 2. Suppose that you are to buy at the current price, through borrowing,1000 shares of stock ABC, and sell it short. This allows you to buy stock XYZ. You also see an opportunity to engage in the bonds market risk-free2.a Do you think you can gain profit from this decision? 2.b If so, by how much? Show complete solution to justify your answerbased on higher and a lower price after one year, for both stocks.
- 7. Answer both questions: a) The stock of Payout Inc. will go ex-dividend tomorrow. The dividend will be $1 per share. There are 20,000 shares of stock outstanding. The market value balance sheet for Payout is below: Assets Liabilities and equity Cash $100,000 Equity $1,000,000 Fixed assets $900,000 i) What price is Payout selling for today? Explain your answer. ii) What price will it sell for tomorrow? Explain your answer. b) Now suppose that Payout announces its intention to repurchase $20,000 worth of stock instead of paying out the dividend. i) What effect will the repurchase have on an investor who currently holds 10 shares and sells 2 of those shares back to the company in the repurchase? ii) Compare the effects of the repurchase to the effects of the cash dividend that worked out in 7(a).Question 3b Mr. Jhon wants to buy the common stock of Hydro electric company. The risk free rate of return is 8% on government bond. The present market portfolio return is 15%. If the beta of systemeatic risk is 1.20, what is the cost of stock?Consider two stocks:Stocks Current Price Possible Prices after one yearStock ABC $12.00 ABC + = $13.60 ABC – = $11.20Stock XYZ. $10.00 ABC + = $11.75 ABC – = $8.80Assume a risk-free borrowing and lending rate is 5.20% and that neither stockpays dividends, and fractional shares can be bought and sold. Question: 1. Do you see that there opportunity to profit in this case? If so, how can that opportunity be realized? Explain your answer 2. Suppose that you are to buy at the current price, through borrowing,1000 shares of stock ABC, and sell it short. This allows you to buy stock XYZ. You also see an opportunity to engage in the bonds market risk-free2.a Do you think you can gain profit from this decision? 2.b If so, by how much? Show complete solution to justify your answerbased on higher and a lower price after one year, for both stocks.
- (CHAPTER 14) You researched Turnkey Investment's financial data and gathered the following information: Current price per share of stock = $105 Expected market portfolio return = 10.1% financial reports on the screen Dividend per share paid just recently = $4.69 Risk-free interest rate = 3.7% Expected annual growth of dividend per share = 5% Stock Beta = 1.37 Calculate the company's cost of equity using the Capital Asset Pricing Model approach. Your answer should be in percent, not in decimals: e.g., 10.23 rather than 0.1023. Do NOT use "%" in your answer. Increase decimal places for any intermediate calculations, from the default 2 to 6 or higher, and only round your final answer to TWO decimal places: forQ-3. (a) As an investor, you are holding the following investments: You are planning to sell the holdings of Stock B. The money from the sale will be used to purchase another $20 million of Stock A and another $10 million of Stock C. The risk-free rate is 7 percent and the market risk premium is 6.5 percent. How many percentage points higher will the required return on the portfolio be after you complete this transaction? (b) Mr. Ahsan is holding a $100 million portfolio that consists of the following six stocks: The portfolio has a required return of 13 percent, and the market risk premium is 5.5 percent. Calculate the required return on Stock A, B, C, D, E, and F?2. Answer both questions: a. You purchase 100 shares of stock for $40 a share. The stock pays a $2 per share dividend at year-end. What is the rate of return on your investment if the year-end stock prices turn out to be $38, $40, and $42? What is your real (inflation-adjusted) rate of return in each case, assuming an inflation rate of 3%? b. Consider the following information on the returns on stock and bond investment. Scenario Profitability Stocks Bonds Recession .2 -5% +14% Normal Economy .6 +15% +8% Boom .2 +25% +4% i) Calculate the expected rate of return and standard deviation in each investment. ii) Do your results support or contradict the historical record on the relationship between risk and return in the financial market in both Canada and the United States? iii) Which investment would you prefer? Explain your answer.
- Please only solve part C A manager buys three shares of stock today, and then sells one of those shares each year for the next 3 years. His actions and the price history of the stock are summarized below. The stock pays no dividends. Time Price Action 0 $ 130 Buy 3 shares 1 150 Sell 1 share 2 150 Sell 1 share 3 150 Sell 1 share a. Calculate the time-weighted geometric average return on this portfolio Time Cash Return 0 3*-130= -390 1 1*150= 150 (150-130)/130= 15.38% 2 1*150= 150 (150-150)/150= 0% 3 1*150= 150 (150-150)/150= 0% Geo Avg Ret= (1.1538)1/3 - 1 = 4.88% b. Calculate the time-weighted arithmetic average return on this portfolio Arith Avg Ret= (15.38+0+0)/3 = 5.13% c. Calculate the dollar-weighted average return on this portfolio6 A preferred stock will pay a dividend of P2.75 in the upcoming year, and every year thereafter, i.e., dividends are not expected to grow. You require a return of 10% on this stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock. Group of answer choices P31.82 P27.50 P0.275 None of these is correct P56.25Question content area top Part 1 (Preferred stock valuation) Kendra Corporation's preferred shares are trading for $29 in the market and pay a $4.70 annual dividend. Assume that the market's required yield is 17 percent. a. What is the stock's value to you, the investor? b. Should you purchase the stock? Question content area bottom Part 1 a. The value of the stock to you, the investor, is $enter your response here per share. (Round to the nearest cent.)