Look at Figure. The unlabeled dot on the far right of the graph represents the average return and standard deviation of Advanced Micro Devices. Down and to the left from that point you can see the position of American Airlines. Now imagine that you form a portfolio with half of your money in AMD and half in AMR. Where do you think that portfolio would plot in Figure?
Answer to relevant QuestionsLook at Table. Compare the best and worst years for Tbills in terms of their nominal returns, and then compare the best and worst years in terms of real returns. Comment on what you find. A financial adviser claims that a particular stock earned a total return of 10 percent last year. During the year the stock price rose from $30 to $32.50. What dividend did the stock pay? If prices move almost at random, then why should we place any value on the CAPM, which makes predictions about expected asset returns? Refer to Figure and answer the following questions. a. What return would you expect on a stock with a beta of 2.0? b. What return would you expect on a stock with a beta of 0.66? c. What determines the slope of the line in ...If the IRR for a given project exceeds a firm’s hurdle rate, does that mean that the project necessarily has a positive NPV? Explain.
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