Suppose the return of asset A to D, is given as follows: Asset 2018 2019 2020 2021 A 9% 10% -2 % 15% B 7% 10% 5 % 9% C -11% 20% 12% 8% D 10% 16% -5 % -8% Calculate the expected return of: a. One stock at a time b. Portfolio of A, B & D, and, B, D, & A c. Portfolio of A & B, and, D & B d. Portfolio of all the four stocks
Q: Category Accounts payable Accounts receivable Accruals Additional paid in capital Cash 2022 104,539…
A: Net profit margin is the amount of net income earned as the percentage of sales of the company and…
Q: SOLVE STEP BY STEP 2 Carp, Inc. wants to evaluate two machines for 3 packaging their products. 4…
A: The net present value represents the absolute profitability in dollar terms generated by a project…
Q: Scheduled payments of $273, $1301, and $1432 are due in one year, four years, and six years…
A: To calculate the equivalent single replacement payment, we need to find the present value of each of…
Q: On January 1, 2019, Company X issued $550,000 of twenty-year bonds when a market rate was 2%. The…
A: The carrying value of a bond refers to the face value plus any unamortized premium or minus any…
Q: Otto Company borrows money on January 1 and promises to pay it back in four semiannual payments of…
A: Present value = Periodic cash flow * Present value annuity factor.2. Present value factor is…
Q: (Related to Checkpoint 5.6) (Solving for i) Kirk Van Houten, who has been married for 22 years,…
A: The future value of a single amount can be calculated by multiplying the present value by the future…
Q: we are evaluating a project that costs $966,000, has a life of twelve years, and has no salvage…
A: Net Present Value (NPV)When determining an investment opportunity for a project, the Net Present…
Q: Beta Compounding Pharmaceuticals is about to launch a new specialty drug for arthritis. It has been…
A: NPVNPV is a capital budgeting tool to decide on whether the capital project should be accepted or…
Q: Given the data in the following table, what is the IRR of Project B? 0 4 $170 -$600 -$520 $190 1…
A: To calculate the Internal Rate of Return (IRR) for Project B, we need to find the discount rate that…
Q: sai Industries is analyzing an average-risk project, and the following data have been developed.…
A: NPV is the net present value and show how much value is added by project and is based on the time…
Q: Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital…
A: The MIRR or modified internal rate of return is the internal rate of return computed by taking into…
Q: Icarus Airlines is proposing to go public, and you have been given the task of estimating the value…
A: WACC is the cost of capital of the company and is the weighted cost of equity and weighted cost of…
Q: 4. Danielle has determined that she needs $150,000 when her son starts college in 18 years.…
A: Present value is the equivalent value of future money needed today based on time and interest rate…
Q: Comprehensive problem) You would like to have $52.000 in 16 years To accumulate this amount, you…
A: The FV of an investment refers to the combined value of its cash flows at a predetermined future…
Q: Calculate the effective annual rate of discount which is equivalent to a nominal rate of discount of…
A: The effective annual rate of discount is calculated using the formula,
Q: $0.68 $0.73 $0.78 Assume that 6-month put options on New Zealand dollars are available with an…
A: To determine the most appropriate hedge for Promina Group and compare it to an unhedged strategy,…
Q: What is the company's cost of debt? a. 9.21% b. 10.31% c. 11.5% d. 7.73% What is the company's…
A: Rate of Bond = 11%Beta = b = 0.75Risk free rate = rf = 4%Market rate of return = rm = 14%Tax rate =…
Q: 2. Martin began saving $5,000 per year from age 25 to age 35 (ten years) and then invested the funds…
A: Compounding is the interest on interest including the interest on the principal amount and due to…
Q: Calculate the real estate's taxes for a property with an amount of $4,500 and a closing date of…
A: Given: Variables in the question:Property amount=$4,500 Closing date = October 15thNote: Calendar…
Q: The price of the coupon paying bond is $1071. The firm has estimated that its cost of debt is 8.5%.…
A: Given variables in the question:Price of bond=$1071Cost of debt=8.5%Maturity of bond=15 yearsCoupon…
Q: Question 8 Find the value of P for which the inflows will equal the outflows. Find the effective…
A: > Calculation of value of P:>Present value of inflows/outflows=cash flow*Present value of…
Q: Jose wants to cash in his winning lottery ticket. He can either receive eight, $6,000 annual…
A: Solution:-When an equal amount is received each period at beginning of the period, it is known as…
Q: The risk-free rate is 1.45% and the market risk premium is 5.21%. According to the Capital Asset…
A: Capital assets pricing model gives the expected rate of return from the stock based on the risk…
Q: A manufacturing equipment costs $7800 and has no salvage value. Maintenance costs are expected to be…
A: EUAC of Capital Recovery Cost =7800(A/P,10%,t) =7800*0.1*(1.1^t)/((1.1't)-1) Discount…
Q: our facility is undergoing a major expansion, which will require significant capital investment into…
A: Deprecation is that amount which is charged on assets by the company every year the useful life of…
Q: You have some extra cash this month and you are considering putting it toward your car loan. Your…
A: Interest rate= 7.10%Amount per Installment= $695No. of Installments = 3Additional amount paid =$1100
Q: QUESTION 1 A man buys a house for $360,000 He makes a $150.000 down payment and amortizes the rest…
A: It is a case where a house is purchased using a downpayment as well as a loan is taken up to cover…
Q: In October, Jeremy spent $390 on food which was 1/3 of his salary. He gave his parents 4/9 of his…
A: Salary is one of useful revenue resource for an individual. From total salary, it is decided that…
Q: 1 unit of Currency A costs 1.53 units of Currency B, 1 unit of Currency B costs 0.67 units of…
A: Triangular arbitrage refers to the opportunity to earn profit that arises from the difference in the…
Q: On January 1, the total market value of the Tysseland Company was $60 million. During the year, the…
A: WACC is a discounting rate, The WACC is used to calculate today's or current value of a company's…
Q: An 8% coupon bond with annual payments (face value = 10,000) currently trades at par. Its annual…
A: Bond duration refers to the measure of the change in the price of the bond as a result of the change…
Q: Using the information in the following table , what is the depreciation expense per year created by…
A: Given: Variables in the question:Cost of equipment=$ 25,600,000Salvage value = $…
Q: 1. The table below shows the activity on the credit card statement of Miss PepperCorn for the month…
A: Financial charges on credit cards refer to the cost of using the credit limit available. Charges can…
Q: Bill Padley expects to Invest $19,000 for 2 years, after which he wants to receive $22,990.00. What…
A: Present Value = pv = $19,000Time = t = 2 yearsFuture Value = fv = $22,990
Q: Assume a discount rate of 7 percent and calculate the effective rent over three years when net rent…
A: YearsRent amount1$232$413$55Discount rate=7%Required:Effective Rent=?
Q: ic City Corporation reported net income of $148,750 for 2019. The company had 10,000 shares of…
A: Basic earning per share is the amount of earning available to each shareholder after payment of…
Q: A person is planning to purchase a car. A new car is costing rupees 3 lacs. The resale value of the…
A: When an object diminishes over time, a replacement is required and that equipment must be promptly…
Q: Problem 8-14 Suppose that the index model for stocks A and B is estimated from excess returns with…
A: The measure of amount of variation of a set of values is called as standard deviation. It is the sum…
Q: You are given that the nominal rate of discount is 9.7% per annum payable at every 3 years.…
A: The effective annual rate of discount can be calculated using the formula,
Q: Caspian Water needs to raise $59.00 million by issuing additional shares of stock. If the market…
A: Solution:Number of shares to be issued by Caspian Water will be calculated by the division of funds…
Q: Ocean Adventures issues bonds due in 10 years with a stated interest rate of 12% and a face value of…
A: Coupon rate = 12% (Semi-annual payment)Face value = $490,000Bond period = 10 yearsBond yield = 13%
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: MIRR, or Modified Internal Rate of Return, is a financial metric used to evaluate the profitability…
Q: Three construction jobs are being considered by Clam City Construction (see the accompanying table).…
A: IRR is also known as internal rate of return. It is a capital budegting technique which helps in…
Q: You have developed the following data to examine the impact of portfolio diversification. Which…
A: Portfolio diversification:The rationale behind diversification is to create a portfolio that will be…
Q: Suppose you observe the following situation: Security Pete Corp. Repete Co. Risk-free rate Beta 1.75…
A: In the given case, we have provided the beta and the expected return of each security.So, using the…
Q: The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 8% per year in the…
A: Given,Growth Rate = 8%Price of stock = $30Last Dividend = $1.50Current dividend = $1.62
Q: Round your answers to one decimal place. As in 10.1 %. Actual Rate US 5.81 USD Britain 3.59 pound…
A: Foreign exchange market includes trading one currency for another at predetermined exchange rates…
Q: You purchased a stock at the beginning of the year for $32 and have just received a dividend of $4.…
A: Realized return, is a metric that evaluates the actual gain or loss on an investment, This…
Q: Your firm spends $421,000 per year in regular maintenance of its equipment. Due to the economic…
A: IRR is a rate at which NPV of the project is equal to the zero or it can be said that PV of cash…
Q: Give typing answer with explanation and conclusion A firm currently has a debt-equity ratio of 2/5.…
A: Debt to Equity = 2 / 5Cost of debt = cd = 4%Cost of Equity = ce = 13%
Suppose the
Asset 2018 2019 2020 2021
A 9% 10% -2 % 15%
B 7% 10% 5 % 9%
C -11% 20% 12% 8%
D 10% 16% -5 % -8%
Calculate the expected return of:
a. One stock at a time
b. Portfolio of A, B & D, and, B, D, & A
c. Portfolio of A & B, and, D & B
d. Portfolio of all the four stocks
Step by step
Solved in 3 steps with 2 images
- Suppose you have portfolio of four stocks Stock A, B, C and D, Total investment in these stocks is equal to 2019331015 $, Beta of these stocks is 1.5, (0.5), 1.25, and 0.75 and proportion invested is 22%, 20%, 30%, and remaining in D. If the Risk free rate is 6% and market rate of return is 15%. Calculate a) Investment in each stock. b) Market premium c) Required Rate of return for each stock. d) Required rate of return of Portfolio. e) If expected rate of return of stock A is 10%, what do you think if it is overvalued or undervalued.Below are the annual returns of the stock A, B, C and D and the market portfolio for the period 2018-2022. Find the expected return and standard deviation of the stock A, B, C, D and the market Year Prob. Asset A Asset B Asset C Asset D Market 2018 0,20 11,00 9,00 12,00 15,00 14,00 2019 0,25 13,00 11,00 15,00 13,00 12,00 2020 0,10 9,00 8,00 11,00 10,00 9,00 2021 0,20 12,00 12,00 11,00 13,00 12,00 2022 0,25 15,00 10,00 9,00 12,00 13,00Stock A and stock C have the following historical returns: Year Stock A Return Beta Stock C Return Beta 2017 (18%) 0.80 (14.50) 0.90 2018 33% 1.5 21.80% 2.0 2019 15% 2.0 30.50% 1.0 2020 (5.50%) -0.90 (7.60%) -0.50 2021 27% 1.0 26.30% 1.5 a. Calculate the average rate of return for each stock during the period 2017-2021 b. Assume you want to create a portfolio consisting of 60 percent of stock A and 40 percent of stock C, b.1. What would be your realized rate of return on the portfolio have been each year? b.2. What would be your average rate of return on the portfolio have been during this period? c. Calculate the standard deviation of the portfolio return d. Calculate the coefficient of variation for each stock and for the portfolio. e. Assuming you are a risk-averse investor, would you prefer to hold Stock A, Stock B, or the portfolio? Why?
- Below are the annual returns provided by TSCM. Calculate average annual return experienced by an investor over the last five years. Calculate the standard deviation of the portfolio return over this period. (See sheet "TSCM" in the attached Excel.) Period Return 2021 -51.0% 2020 43.0% 2019 61.0% 2018 -5.0% 2017 -19.0% In the year 2022, TSCM return is 21%. Calculate TSCM's Jensen's Alpha for the year period in annual terms. Use the below data. Beta = 2.3 Risk-free rate = 1% Expected Market Return = 8%You hold an equally-weighted (half invested in each) portfolio consisting of two stocks A and B, whose returns for the past three years are given below. Year Stock A Stock B 2018 24% -8% 2019 -4% 20% 2020 10% 6% What are the average return and standard deviation of your portfolio AB? Average return is %, standard deviation is %. Round your answer to a whole number, e.g., x or xx. (Hint: Think of portfolio return each year.)Assume you are considering a portfolio containing Asset 1 and Asset 2. Asset 1 will represent 37% of the dollar value of the portfolio, and asset 2 will account for the other 63%. Assume that the portfolio is rebalanced at the end of each year. The expected returns over the next 6 years, 2021–2026, for each of these assets are summarized in the following table: Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Projected Return Year Asset L Asset M 2021 −9% 33% 2022 15% 5% 2023 26% −9% 2024 4% 18% 2025 −9% 33% 2026 33% −18% . a. Calculate the expected portfolio return, rp, for each of the 6 years. b. Calculate the average expected portfolio return, rp, over the 6-year period. c. Calculate the standard deviation of expected portfolio returns, sp, over…
- Use the following forecasted financials: (See pictures. Certain cells were left blank on prupose) b) Use the CAPM model to derive the cost of equity capital. Assume beta equals 1.09, the risk-free rate is 1.62%, and the market risk premium is 4.72%. a)Calculate residual income for 2021 and 2022. c) Calculate the present value of residual income for 2024 and 2025.Suppose we want to determine the expected return and standard deviation for a portfolio of assets A (60%) and B (40%). The expected returns of assets A and B for each of the next 5 years are given in columns 1 and 2 respectively in the table. Find the expected return and standard deviation for the portfolio.Years A B2018 10% 6%2019 15% 8%2020 12% 10%2021 9% 7%2022 14% 9%What is the expected return for the following portfolio? (State your answer in percent with two decimal places.) Stock Expected returns Investment AAA 35% $500,000 BBB 29% $1,300,000 CCC 18% $1,200,000 DDD 7% $1,500,000 O.17.13% O.19.40% O.21.01% O.22.21% O.23.88%
- Set up the complete formula for Dollar Weighted Return (DWR) for the following portfolio including final value of the portfolio. Year 0 1 2 3 4 Actions at the ending of the year (Yr0)Starting with $1000 (Yr1)Adding $100 (Yr2)Withdrawing $200 (Yr3)Adding $300 (Yr4)Ending Value = ? ROR during each Yr (Yr0) - (Yr1) 8% (Yr2)-4% (Yr3) 9% (Yr4) 3% A. Calculate the time weighted return (TWR) Complete Questions with respect to ExcelThe table below lists the annual return on stock W between 2015 and 2019. Year 2015 2016 2017 2018 2019 Annual Return 12% -10% 20% -4% -8% The annual realized compounded return on stock W between 2015 and 2019 is closest to _____. A. 1.33% B. 2.33% C. 2% D. 3%Assume that ASX 300 Index represents the risky portfolio. Calculate the annual return for the period 2011- 2020 for the risky portfolio using the data given for the ASX 300 Index. Year ASX 300 Index ASX 300 Dividend Yield (%) Return_risky portfolio 2010 4760.79 3.76 - 2011 4052.27 4.93 ??? 2012 4626.27 4.33 ??? 2013 5304.8 3.99 ??? 2014 5348.93 4.24 ??? 2015 5249.09 4.72 ??? 2016 5617.73 4.09 ??? 2017 6023.3 4.04 ??? 2018 5596.96 4.48 ??? 2019 6647.74 3.95 ??? 2020 6574.33 2.82 ??? Calculate the annual return for the period 2011-2020 for the risk-free asset using the data given for the risk-free asset Year Risk free rate (%) Return_risk-free asset 2011 5.03 2012 4.51 ??? 2013 3.11 ??? 2014 2.61 ??? 2015 2.75 ??? 2016 2.34 ??? 2017 1.78 ??? 2018 1.77 ??? 2019 2.02 ??? 2020…