Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 7, Problem 18PS
Portfolio risk Your eccentric Aunt Claudia has left you $50,000 in BP shares plus $50,000 cash. Unfortunately her will requires that the BP stock not be sold for one year and the $50,000 cash must be entirety invested in one of the stocks shown in Table 7.9. What is the safest attainable portfolio under these restrictions?
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You want to create a portfolio equally as risky as the market, and you have $500,000 to invest. Information about the possible
investments is given below:
Asset
Stock A
Stock B
Stock C
Risk-free asset
Investment,
$ 141,000
$ 139,000
Beta
.86
1.31
1.46
How much will you invest in Stock C? How much will you invest in the risk-free asset?
Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.
Investment in Stock C
Investment in risk-free asset
You want to create a portfolio equally as risky as the market, and you have $500,000 to
invest. Information about the possible investments is given below:
Investment
$137,000
$143,000
Asset
Stock A
Stock B
Stock C
Risk-free asset
Beta
.82
1.27
1.42
How much will you invest in Stock C? How much will you invest in the risk-free
asset? (Do not round intermediate calculations and round your answers to 2 decimal
places, e.g., 32.16.)
Investment in Stock C
Investment in risk-free asset
You want to create a portfolio equally as risky as the market, and you have $500,000 to
invest. Information about the possible investments is given below:
Asset
Stock A
Stock B
Stock C
Risk-free asset
Investment
$135,000
$145,000
Beta
.80
1.25
1.40
How much will you invest in Stock C?
How much will you invest in the risk-free asset?
Investment in Stock C
Investment in risk-free asset
(Do not round intermediate calculations and round your answers to 2 decimal places,
e.g., 32.16.)
Chapter 7 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 7 - Expected return and standard deviation A game of...Ch. 7 - Standard deviation of returns The following table...Ch. 7 - Average returns and standard deviation During the...Ch. 7 - Portfolio risk True or false? a. Investors prefer...Ch. 7 - Risk and diversification In which of the following...Ch. 7 - Portfolio risk To calculate the variance of a...Ch. 7 - Portfolio betas Suppose the standard deviation of...Ch. 7 - Portfolio betas A portfolio contains equal...Ch. 7 - Prob. 9PSCh. 7 - Prob. 10PS
Ch. 7 - Stocks vs. bonds Each of the following statements...Ch. 7 - Prob. 12PSCh. 7 - Prob. 13PSCh. 7 - Portfolio risk Hyacinth Macaw invests 60% of her...Ch. 7 - Portfolio risk a) How many variance terms and how...Ch. 7 - Portfolio risk Table 7.9 shows standard deviations...Ch. 7 - Portfolio risk Your eccentric Aunt Claudia has...Ch. 7 - Stock betas There are few, if any, real companies...Ch. 7 - Portfolio risk You can form a portfolio of two...Ch. 7 - Portfolio risk Here are some historical data on...Ch. 7 - Portfolio risk Suppose that Treasury bills offer a...Ch. 7 - Beta Calculate the beta of each of the stocks in...
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