The portfolio of 50% Project A and 50% project B offers and offers a way of earning a more stable return than either a total investment in project A or project B. time 1 True O False 6 7 8 9 2 3 57.00% 4 19.00% 5 70.00% 10 Returns on Project A 39.00% 122.00 % 25.00% 39.00% 42.00% -23.00 % -32.00 % Returns on Project B -23.40% -73.20% -34.20% -11.40% -42.00% -15.00% -23.40% -25.20% 13.80% 19.20%
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- An investment advisor has recommended a R50,000 portfolio containing assets R, J, and K; R25,000 will be invested in asset R, with an expected annual return of 12 percent; R10,000 will be invested in asset J, with an expected annual return of 18 percent; and R15,000 will be invested in asset K, with an expected annual return of 8 percent. What is the expected annual return of this portfolio? What is the correct answer? A. 12.01% B. 12.00% C. 11.98% D. 12.93%The investor has R60,000 to invest. R15,000 will be invested into the market portfolio, R10,000 into asset A and R25,000 into asset B. The balance will be invested into the risk-free asset. The beta for asset A and asset B is 0.90 and 1.2 respectively. What is the portfolio beta? A. 0.09 B. 0.90 C. 0.91 D. 0.92A firm evaluates all of its projects by applying the IRR rule. The required return for the following project is 21 percent. The IRR is _____ percent and the firm should ______ the project. Year cash flow 0 -$28,643 1 21,000 2 16,000 3 4,000 67 percent; reject 26 percent; accept 26 percent; reject 30 percent; accept 30 percent; reject
- The investor has R60,000 to invest. R15,000 will be invested into the market portfolio, R10,000 into asset A and R25,000 into asset B. The balance will be invested into the risk-free asset. The beta for asset A and asset B is 0.90 and 1.2 respectively. What is the portfolio beta? What is the correct answer? A. 0.09 B. 0.90 C. 0.91 D. 0.92What is the expected return of the following portfolio of investments, Investment r Amount Invested DEF 4% $30,000 JKL 24 25,000 TUV 14 45,000Set 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 Excel
- Year Risk free rate (%) Return_risk-free asset 2011 4.51 - 2012 3.11 2013 2.61 2014 2.75 2015 2.34 2016 1.78 2017 1.77 2018 2.02 2019 0.90 2020 0.02 Average Calculate return on risk free asset and its average and assume: Average (Return on Risky Portfolio) 3.86% Standard deviation (Risky Portfolio) 10.56% Expected Return (Complete Portfolio) 7% Solve for the proportions of y and (1-y) such that: E(Rc)=Rf+y[E(rp)-rf]) = 7%What is the internal rate of return of an investment that requires a 10 percent minimum rate of return and has the following projected cash flows: Yr0 = -100, Yr1 = 25, Yr2 = 35, Yr3 = 45, Yr4 = 35, and Yr5 = 30? a. 19.33 percent b. 21.35 percent c. 20.05 percent d. 22.24 percentWhat is the net present value of an investment that requires a 10 percent minimum rate of return and has the following projected cash flows: Yr0 = -100, Yr1 = 25, Yr2 = 35, Yr3 = 45, Yr4 = 35, and Yr5 = 30? a. 41 b. 28 c. 34 d. 35
- Two investments have the following pattern of expected returns:Investment AYear 1 2 3 4 4 (sale)BTCF $5,000 $10,000 $12,000 $15,000 $120,000Investment BYear 1 2 3 4 4 (sale)BTCF $2,000 $4,000 $1,000 $5,000 $180,000Investment A requires an outlay of $110,000 and Investment B requires an outlay of $120,000.a. What is the BTIRR on each investment?b. If the BTIRR were partitioned based on BTCFo and BTCFs what proportions of the BTIRR would be represented by each?c. What do these proportions mean?9–16 Compute the (a) net present value, (b) internalrate of return (IRR), and (c) discounted payback period (DPB) for each of the following projects. The firm’s required rate of return is 14 percent. Year Project Alpha Project Beta 0 $(270,000) $(300,000) 1 120,000 0 2 120,000 (80,000) 3 120,000 555,000 Which project(s) should be purchased if they areindependent? Which project(s) should be purchased it they are mutually exclusive?A firm evaluates all of its projects by using the NPV decision rule. Year Cash Flow 0 −$ 28,000 1 24,000 2 13,000 3 6,000 a. At a required return of 28 percent, what is the NPV for this project? b. At a required return of 35 percent, what is the NPV for this project?