Stocks A and B have the following returns: (Click on the following icon o in order to copy its contents into a spreadsheet.) Stock A Stock B 1 0.09 0.04 0.06 0.03 3. 0.12 0.06 4. - 0.04 0.02 5 0.09 -0.02 a. What are the expected returns of the two stocks? b. What are the standard deviations of the returns of the two stocks? c. If their correlation is 0.47, what is the expected return and standard deviation of a portfolio of 51% stock A and 49% stock B? What the expected returns of the two stocks?
Q: 17. With risk-free rate of 6%, Beta of 1.5, market return of 8%, prevailing credit spread of 3% and…
A: We need to use CAPN method to calculate cost of equity Cost of equity =Risk free rate+Beta(market…
Q: The interest rate on a $14,600 loan is 10.0% compounded semiannually. Semiannual payments will pay…
A: The interest rate compounded semi annually means interest charged for every semi annual period and…
Q: been given the following information on Claiborne Industries: Current stock price = $32 Option’s…
A: Call option give the opportunity to buy stock on expiration but there is no obligation to do that…
Q: cts) eBook A firm with a WACC of 10% is considering the following mutually…
A: NPV= Present value of cashinflows - Present value of cashoutflows.
Q: Company A is considering acquiring Company B. Neither company has any debt. Company A expects the…
A: Given: After tax cash flow due to synergy = $2 million Company B discount rate = 10% Current market…
Q: Derry Corporation is expected to have an EBIT of $3,400,000 next year. Increases in depreciation,…
A: Given, EBIT of Derry Corporation=$3,400,000 next year. Capital spending = $160,000, $155,000, and…
Q: 7 Name the four general real estate investment styles and describe each and give examples of each.
A: Real estate is land with all permanent improvements related to land, whether natural or man-made,…
Q: A bond pays $10,000 per year for the next 10 years. The bond costs $90,000 now. Inflation is…
A: Given, Bond pays 10,000 / year for 10 years. Cost of bond = $90,000 Inflation = 6% for 10 years
Q: 13 Suppose that Argentina’s 10-year bonds are yielding more than 100 percent annually. Does this…
A: A bond is a bond that represents a loan that an investor makes to a borrower (usually a company or…
Q: 8. Which of the following statements is FALSE? A) In general, the difference between the cost of…
A: Given, In this question we have to choose the correct answer out of the four given options. The…
Q: Suppose a company’s equity is currently selling for $37 per share and that there are 2 million…
A: The capital structure of company consist of both debt and equity. Gearing ratio is a ratio used for…
Q: Anne buys a television set from a merchant who asks for P1,250 at the end of 60 days. Mr. Ureta…
A: Cash price for the television can be calculated as: = Value after 60 days / (1 + Interest rate for…
Q: A debt of P10,000 with yearly interest of 24% is to be amortized over the next 6 years with the…
A: Debt paid in equal annual payment from year 1 to year 6. Amortization table used to display the…
Q: How much would you have (to the nearest dollar) when you retire if the account pays 3% compounded…
A: Future Value of Annuity: It is the future worth of the company today and is computed by the product…
Q: 10 The balance of an investment fund at the beginning of the year and at the end of the year is…
A: Discounting is a technique which is used to compute the present value (PV) of future amount by using…
Q: Which of the following is not a function of financial markets? Scope transformation…
A: Financial markets, as the name implies, are a type of market that provides a way to buy and sell…
Q: A bank advertises Annual Percentage Rate (APR) of 14% compounded monthly for loans. Determine the…
A: APY is calculated as the effective annual rate of return or the actual rate of return charged after…
Q: a) a best efforts arrangement whereby Astro will keep 2.4% of the retail sales or (b) a firm…
A: Any net profits obtained upon the disposal, realisation, or redemption of an Authorized Investment,…
Q: The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to…
A: The DCF approach , can be applied as follows, Cost of Equity =Expected dividend Curretn…
Q: Year 1 180,000 200,000 300,000 240,000 230,000 210,000 330,000 260,000 195,000 155,000 The company…
A: “Since you have asked to solve part D, E and F only, we will solve the same parts for you.” Capital…
Q: If interest rates remain unchanged, what do you expect the price of these bonds to be (a) 1 year…
A: Bond valuation refers to a method which is used to compute the current value or present value (PV)…
Q: Riley Enterprises and Lane Industries both have new projects that require an initial investment of…
A: Internal rate of return can be defined as the capital budgeting technique which brings down the net…
Q: A $1,000 par bond with an annual coupon has only one year until maturity. Its current yield is…
A: Given that: Current Yield= 6.713% Price of the bond=(Coupon+1000)1.10............................(1)…
Q: Devalued currency may be a good reason for a country to: a. import. b. export. c.…
A: Devaluation is referred to as the adjustment in a country's currency value in a downward trend. It…
Q: Nate. borrowed Php 2000.00 from Mr. Mark on June 1,1928 and Php 500.00 on June 1, 1930, agreeing…
A:
Q: How much interest (to the nearest dollar) would be saved on the following loan if the home were…
A: Loan amount = Amount of home * (1-Down payment %) = 501000*(1-20%) =400800
Q: Division A of Kern Co. has sales of $350,000, cost of goods sold for $200,000, operating expenses of…
A: Formula Return on investment = (Sales-Cost of goods sold-Operating expenses)/Invested assets Where…
Q: Assume that you are considering the purchase of a 11-year, noncallable bond with an annual coupon…
A: A bond is a debt instrument that is used to raise capital. It differs from a loan because it can be…
Q: Majestic Aircraft Corporation is considering purchasing composite wing fixtures for the assembly of…
A: Net annual cash flow can be defined as the per year cash inflows as deducted by the per year cash…
Q: Raquel borrowed $2300 from the bank for 18 months. The bank discounted the loan at 3.4%. How much…
A: 1) Interest = 2300 * 3.4% = $78.2 2) Amount Raquel received from Bank: = Loan amount - Interest…
Q: 6c A large profitable corporation is considering a capital investment of $50.000. The equipment has…
A: Tax for year 2 will be calculated on net income. Tax for year 2 =(Annual gross…
Q: Companies invest in expansion projects with the expectation of increasing the earnings of its…
A: Net Present Value (NPV) of a project is the sum of the present value of the cash outflow or inflow.…
Q: Jarett & Sons' common stock currently trades at $37.00 a share. It is expected to pay an annual…
A: Formula; Cost of common equity = D1 / P0 + g Where; D1 = Next dividend i.e. $1.25 P0 = Current stock…
Q: Which loan should Spike take and why?
A: Simple interest method is a method of computing interest on borrowed amount where interest is…
Q: You were offered 2 investment opportunities, Stock M and Stock D. Your decision as to which…
A: Decision would be taken based on calculating expected rate of return using CAPM formula. Required…
Q: Use a calculator to evaluate the amortization formula for the values of the variables P, r, and t…
A: Mortgage amortization refers to a schedule which is prepared to shows the periodic loan payments,…
Q: From the following information calculate the net present value of the two projects and suggest which…
A: Net Present Value: It is a metric used in capital budgeting to determine the profitability of the…
Q: Suppose you want to buy a $150,000 home. You found a bank that offers a 30-year loan at 4.1% APR.…
A: Given: Loan Amount = $150,000 No. of Year = 30 years Annual Rate = 4.1% We will calculate the…
Q: The carreacy bank hold in their vaults plus their deposits at the Federal Reserve. A Bank Reseves…
A: Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: a) Find the average daily balance for the billing period. b) Find the finance charge to be paid on…
A: Average daily balance refers to the amount of the daily balances in the account divided by the…
Q: Roberts Company is considering an investment in equipment that is capable of producing more…
A: Payback period Payback period is a capital budgeting tools to decide on which capital project is…
Q: Suppose you decide to take the tour now and use a 15% credit card for the purchase. Use the…
A: Given that: The formula sheet of above able is:
Q: Debt to Assets ratio? Current assets $22400 Net income $44500 Stockholders' Current liabilities…
A: Debt to assets ratio is computed by dividing the debt amount by the total assets amount. It is a…
Q: Skeng would like to receive equal instalment of $250,000 at the end of each year for the next 8…
A: FORMULA PVA = P*[1-(1+R)-N]/R Where PVA - Present value of annuity P - Annual payment amount i.e.…
Q: A one-year annuity that pays $100 semi-annually will starts its payment in 6 months from now. APR is…
A: Present Value of Ordinary Annuity refers to the concept which dictates the discounted value of a…
Q: Trapper Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a…
A: Solution:- We know Earnings per Share (EPS) means the amount of earnings available to each…
Q: Discuss the Beta of as measure of systematic risk.
A: In finance systematic risk refers to that risk which is inherent to the entire market. As the risk…
Q: Your client has the choice of two alternative property investments, whose cash flows are set out as…
A: Concept. Npv is capital budgeting tool. It is used to evaluate performance of projects or to make…
Q: Kinston Industries just announced that it will cut its dividend from $3.00 to $2.00 and use the…
A: Answer - Step 1 - Calculation of Cost of Equity - Stock Price = Dividend / (Cost of Equity -…
Q: 6. Nielson Motors has a share price of $25 today. If Nielson Motors is expected to pay a dividend of…
A: 1) Dividend Yield Dividend yield = Dividend /Current share price = 0.75/ 25 = 3.0%
answer all three subparts
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
- An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 10%, the return on the SMB portfolio (rSMB) is 3.2%, and the return on the HML portfolio (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = 20.4, and di = 1.3, what is the stock’s predicted return?The standard deviation of stock returns for Stock A is 40%. The standard deviation of the market return is 20%. If the correlation between Stock A and the market is 0.70, then what is Stock A’s beta?Consider information given in the table below and answers the question asked thereafter: State Probability return on stock A Return on stock B A 0.15 10% 9% B 0.15 6% 15% C 0.10 20% 10% D 0.18 5% -8% E 0.12 -10% 20% F 0.30 8% 5% i. Calculate expected return on each stock? On the basis of this measure, which stockyou will choose?ii. Calculate standard deviation of the returns on each stock? On the basis of thismeasure, which stock you will choose?iii. Calculate coefficient of variance of the returns on each stock? On the basis of thismeasure, which stock you will choose?
- Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Common Stock A Common Stock B Probability Return Probability Return 0.25 13% 0.25 −7% 0.50 14% 0.25 7% 0.25 18% 0.25 16% 0.25 23% (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. Given the information in the table, the expected rate of return for stock A is enter your response here %. (Round to two decimal places.) Part 2 The standard deviation of stock A is enter your response here %. (Round to two decimal places.) Part 3 b. The expected rate of return for stock B is enter your response here %. (Round to two decimal places.) Part 4 The standard deviation for stock B is enter…Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Common Stock A Common Stock B Probability Return Probability Return 0.35 13% 0.25 −7% 0.30 17% 0.25 8% 0.35 21% 0.25 15% 0.25 23% (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. Given the information in the table, the expected rate of return for stock A is enter your response here%. (Round to two decimal places.)The market and Stock J have the following probability distributions: Probability rM rJ 0.3 15.00 % 19.00 % 0.4 10.00 6.00 0.3 18.00 10.00 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet Calculate the expected rate of return for the market. Do not round intermediate calculations. Round your answer to two decimal places.fill in the blank %Calculate the expected rate of return for Stock J. Do not round intermediate calculations. Round your answer to two decimal places.fill in the blank % Calculate the standard deviation for the market. Do not round intermediate calculations. Round your answer to two decimal places.fill in the blank %Calculate the standard deviation for Stock J. Do not round intermediate calculations. Round your answer to two decimal places.fill in the blank %
- You are given the following probability distribution of returns for a stock. Use the data to calculate the expected return, standard deviation of returns, and coefficient of variation of returns for the stock. Report the CV to 4 decimal places (13.36% = 0.1336). Return Probability 8.0% 0.20 10.0% 0.10 12.0% 0.40 15.0% 0.20 16.0% 0.10Suppose that you would like to create composite indexes from three stocks: stk1, stk2, stk3. Their stock prices (Pt) and total shares outstanding (Qt) from day 0 to day 1 are shown as follows: stk3 splits two-for-one in day 1. P0 Q0 P1 Q1 stk1 40 100 50 100 stk2 50 200 50 200 stk3 60 150 50 300 Which answer is the closest value to the rate of return on an equal-weighted index of the three stocks? A. 20% B. 25% C. 30% D. 35%Suppose that you would like to create composite indexes from three stocks: stk1, stk2, stk3. Their stock prices (Pt) and total shares outstanding (Qt) from day 0 to day 1 are shown as follows: stk3 splits two-for-one in day 1. P0 Q0 P1 Q1 stk1 40 100 50 100 stk2 50 200 50 200 stk3 60 150 50 300 Which answer is the closest value to the rate of return on a value-weighted index of the three stocks? A. 20% B. 25% C. 30% D. 35%
- The index model has been estimated for stocks A and B with the following results: RA 0.01 +0.5RM + A RB = 0.02 +1.3RM + eB standard deviation of the market is 0.25, standard deviation of eA is 0.2 and standard deviation of eB is 0.10 What is the covariance betwween the returns on stocks A and B?.the following table shows the beta and expected return for each of five stocks. Stocks Beta Expected return 1 1.2 0.124 2 1.0 0.110 3 0.7 0.103 4 0.4 0.068 5 0.1 0.047 All of these stocks except one lie on the Security Market Line. Required: Calculate the alpha of the stock that does NOT lie on the Security Market Line.Ahmed observed the following data of two stocks as shown in the below table. Which stock do you advise Ahmed to select according to the required rate of return? And explain why? Stock A Stock B Market Standard Deviation Return 30% 30% 22% Correlation Coefficient between A & M -30% Correlation Coefficient between B & M 30% Expected Market Return 11% Risk-Free rate of return 5%