You have ($175,000) to invest. You choose to put ($225,000) into the market by borrowing ($50,000. a.

Question:

You have $$175,000$ to invest. You choose to put $$225,000$ into the market by borrowing \($50,000.

a. If the risk-free interest rate is 6% and the market expected return is 7%, what is the expected return of your investment?

b. If the market volatility is 15%, what is the volatility of your investment?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Corporate Finance

ISBN: 9781292446318

6th Global Edition

Authors: Jonathan Berk, Peter DeMarzo

See More Books

Question Posted: Apr 04, 2024 04:00 AM

See More Questions

13. What is a lower bound for the price of 3-month call option on a non- dividend-paying stock when the stock price is $50, the strike price is $45, and the 3-month risk-free interest rate is 8%?...
Last Sale Net Bid Ask Open Int Puts Last Sale Net bid Ask Vol Open Int 16Aug 155.00(1619H155-E) 6.45 0.75 6.95 7.25 9 16Aug 155.00(1619T155-E) 1.18 (0.75) 1.17 1.25 61 4505 16Aug 166.00(1619H160-E)...
26. With its current leverage, Impi Corporation will have net income next year of 4.5 million. If Impis corporate tax rate is 35% and pay 8% interest on its debt, how much additional debt can Impi...
Which of the following is characteristic of a traditional cost system? a. Reliance on financial performance measures b. Many work in process account transactions c. Many process control points d. All...
Create a fictional company and develop a memo to communicate the importance of a business continuity plan to the board of directors.
Refer to the Electrical Engineering (Vol. 95, 2013) study of power quality (measured by "sags" and "swells") in Turkish transformers, Exercise 2.96. For a sample of 103 transformers built for heavy...
An 800-kg car moving at $108 \mathrm{~km} / \mathrm{hr}$ hits and gets entangled with a large truck of inertia $10,000 \mathrm{~kg}$ initially at rest. What is the kinetic energy of the wreckage?...
CSC is evaluating a new project to produce encapsulators. The initial investment in plant and equipment is $500,000. Sales of encapsulators in year 1 are forecasted at $200,000 and costs at $100,000....
Assume the export price of a Nissan car from Japan is Yen 3,000,000. The exchange rate is Yen 122.00/$. A forecast on inflation in the USA is 2% and 0% in Japan per annum. Assuming purchasing power...
The Optima Mutual Fund has an expected return of 19.1% and a volatility of 21.5%. Optima claims that no other portfolio offers a higher Sharpe ratio. Suppose this claim is true, and the risk-free...
You have $$9800$ to invest. You decide to invest $$19,000$ in Google and short sell $$9200$ worth of Yahoo! Googles expected return is 14% with a volatility of 27% and Yahoo!s expected return...
Three vertices of a rectangle in the standard (x,y) coordinate plane have the coordinates (2,3), (4,3) and (4,2). What are the coordinates of the fourth vertex? A. (2,2) B. (3,3) C. (3,3) D. (2,2) E....
Provide a concrete example of how bottom-up information from the software programming phase of design may be useful in refining the architectural design.
How do you return from an ARM procedure?
What two registers contribute to the program counter value?
Explain the operation of the BL instruction, including the state of ARM registers before and after its operation.
Why are specialized instruction sets such as Neon or Jazelle useful?
A current pulse is fed to the partial circuit shown in Figure P32.25. The current begins at zero, then becomes 10.0 A between t = 0 and t = 200 μs, and then is zero once again. Determine the...
Assume that your audit team has established the following parameters for the examination of ELM's sales transactions: LO G-3 Risk of incorrect acceptance...
Why do we employ perceptual screens to filter the ads to which we are exposed? 2. What does the term consumer behavior refer to, and why is it important to advertisers? What is the difference...
What is the meaning of all of these? "Transforming the complex to the simple is pure genius" "Complexity that works is built up out of modules that work perfectly, layered one over the other"
2) An opening bridge takes 60 seconds to open. The opening motion is shown on the angular velocity time diagram (Figure 14). Figure 14 Angular Velocity (rad.s) 0.03 0.02 0.01 0 10 20 30 40 40 50 60...

You have ($175,000) to invest. You choose to put ($225,000) into the market by borrowing ($50,000. a.

Question:

Step by Step Answer:

a Lets break down the components of the expected return for your investment Investment Amount 175000 ...View the full answer

Corporate Finance

Students also viewed these Business questions