The preferred stock of North Coast Shoreline pays an a sells for $20.24 a share. What is the rate of return on this security? A 595 percent B.7.08 percent C.8.40 percent D. 11.90 percent DE 14.17 percent
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- Curtis invests $600,000 in a city of Athens bond that pays 8.25 percent interest. Alternatively, Curtis could have invested the $600,000 in a bond recently issued by Initech, Incorporated that pays 11.00 percent interest with similar risk as the city of Athens bond. Assume that Curtis's marginal tax rate is 24 percent. How much explicit tax would Curtis incur on interest earned on the Initech, Incorporated bond? Multiple Choice $50,560.00 $15,840.00 $11,880.00 $36,920.00 None of the choices are correct.A company is considering implementing a project that generates a guaranteed income of 1000 from next year and every year thereafter, while the project has an investment cost of 10,000 today. In addition, there is a one-off maintenance cost of 20 000 in exactly 10 years time. Assume that the risk-free interest rate is 3 percent. Is the project profitable to implement?The table below shows information for 3 stocks. Security Beta Risk-free rate Expected market return Stock 1 1.9 0.02 0.09 Stock 2 1.2 0.035 0.09 Stock 3 0.2 0.015 0.09 The risk-free rates are different because they were measured in different years. Calculate the expected (or required) return for each stock, using the Capital Asset Pricing Model (CAPM). What is the required return for stock 1? What is the required return for stock 2? What is the required return for stock 3?
- You observe the E[IBM] = 8%, E[AAPL] = 12%, B(AAPL)=B(IBM)+2/3, Risk-free rate is 4%. What is the expected return on the market portfolio assuming the CAPM is true.Assume that you manage a risky portfolio with an expected return of18% and a standard deviation of 28%. The T-note rate is 2.7%. If your client chooses to invest 75% of a portfolio in your fund and 25% in a T-note bond fund. a. What is the expected return of your client's portfolio? b. What is the standard deviation of your client's prtfolio?Microsoft has the opportunity to purchase a new factory today that will provide them with a $50 million return four years from now. If prevailing interest rates are 6 percent, what is the maximum that the project can cost for Microsoft to be willing to undertake the project? a. $53,406,002 b. $39,604,682 c. $43,456,838 d. $50,000,000 e. $34,583,902 D D
- 12. Capital market flows are explained by the diversification of portfolios a. True b. FalseCalculate the value of a stock that is expected to pay a constant dividend of $1.05per year if the required return is 11%.The Franko Company has a beta of 1.20 By what percent will the rate of return on the stock of Franko Company increase if the market rate of return rises by 3%?
- 7. Even if we can't exactly establish the actual cost of a stock out, in most cases we can still determine an appropriate level for safety stock. True FalseTrue or False: Increasing the number of stocks in a portfolio reduces firm-specific risk. TrueFalseConsider two stock portfolios. Portfolio A consists of 20 different stocks from firms in different industries. Portfolio B consists of four different stocks, also from firms in different industries. The return on Portfolio A is likely to be volatile than that of Portfolio B.Suppose a stock analyst recommends buying stock in the following companies:Company IndustryToyonda AutomotiveSaalvo AutomotiveGMW AutomotiveHonsubishi AutomotiveShexxon Oil and gasMobron Oil and gasAiring AircraftBoebus AircraftGoohoo TechnologyPherk PharmaceuticalEach of the following portfolios contains four of the stock picks. Which portfolio is the least diversified? Pherk, Airing, Goohoo, ShexxonToyonda, Honsubishi, Boebus, AiringToyonda, Saalvo, GMW, HonsubishiBoebus, Airing, Shexxon, MobronWhat percentage of households in the United States own corporate stock, either directly or indirectly? a. 15 percent b. 25 percent c. 50 percent d. 30 percent e. 20 percent