A stock has a beta of 1.19 and an expected return of 12.4 percent. A risk-free asset
Question:
A stock has a beta of 1.19 and an expected return of 12.4 percent. A risk-free asset currently earns 2.7 percent.
a. What is the expected return on a portfolio that is equally invested in the two assets?
b. If a portfolio of the two assets has a beta of .92, what are the portfolio weights?
c. If a portfolio of the two assets has an expected return of 10 percent, what is its beta?
d. If a portfolio of the two assets has a beta of 2.38, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain.
Step by Step Answer:
Answer a Calculation of the expected return on the portfolio 124 x 050 27 x 050 62 ...View the full answer
Fundamentals Of Corporate Finance
ISBN: 9781265553609
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
Related Video
Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.
Students also viewed these Business questions
-
How do you interpret the quotes for financial futures in The Wall Street Journal?
-
A stock has a beta of 1.13 and an expected return of 11.8 percent. A risk-free asset currently earns 2.6 percent. a. What is the expected return on a portfolio that is equally invested in the two...
-
A stock has a beta of 1.35 and an expected return of 16%. A risk-free asset currently earns 4.8%. 1. What is the expected return on a portfolio that is equally invested in the two assets? 2. If a...
-
Design a difference amplifier to have a gain of 4 and a common-mode input resistance of 20 k at each input.
-
A solution is 1.5 10-4 M Zn2+ and 0.20 M HSO4. The solution also contains Na2SO4. What should be the minimum molarity of Na2SO4 to prevent the precipitation of zinc sulfide when the solution is...
-
Give an example of a gain-sharing plan that could be implemented by an airline.
-
A trade association (or trade group) is an organization that firms in the same industry form to collect and disseminate trade information, offer legal and technical advice, furnish industry-related...
-
Cos Cob Systems, Inc., makes heat-seeking missiles. It has recently been offered a government contract from which it may realize a profit. The contract purchase price is $130,000 per missile, but the...
-
6. 7. 8. The reaction of sulphur in alkaline medium is given below Sais) +aOH bs2 (aq) (aq) + CS0 (aq) + H2O (1) . (Integer answer) The values of 'a' is 4.5g of compound A (MW = 90) was used to make...
-
Arlington Corporations financial statements (dollars and shares are in millions) are provided here. a. What was net operating working capital for 2017 and 2018? Assume that all cash is excess cash;...
-
Consider the following information about three stocks: a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio expected return? The variance? The...
-
Stock Y has a beta of 1.2 and an expected return of 11.5 percent. Stock Z has a beta of .80 and an expected return of 8.5 percent. If the risk-free rate is 3.2 percent and the market risk premium is...
-
The composite beam is constructed from wood and reinforced with a steel strap. Use the method of Sec. 6.6 and calculate the maximum shear stress in the beam when it is subjected to a shear of V = 50...
-
Janet and Bruce, both 43, are married taxpayers filing jointly. They have itemized deductions consisting of these: Home mortgage interest $19,500 State income taxes $8,700 Property taxes $5,200...
-
The velocity of sound in air is 340ms^-1 and a closed pipe L cm long produces it's fundamental frequency. State the fundamental frequency in Hz.
-
Suppose you want to have $ 1 , 0 0 0 , 0 0 0 for retirement in 2 5 years. Your account earns 4 % interest. a ) How much would you need to deposit in the account each month? b ) How much interest will...
-
Recently, the FASB and International Accounting Standards Board (IASB) have been working on several projects in order to harmonize the accounting rules between GAAP and IFRS. This project requires...
-
1. How can the corporate functions of the Board of Directors be differentiated from the corporate functions of the corporate officers? 2. What is the rationale of the law why the requirements of...
-
(a) Establish the equivalence inequalities (3.35) between the 1 and oo norms. (b) Verify them for the vectors in Exercise 3.3.31. (c) For which vectors v R" are your inequalities equality?
-
The outer loop controls the number of students. Note that the inner loop of this program is always executed exactly three times, once for each day of the long weekend. Modify the code so that the...
-
Take Time Corporation will pay a dividend of $3.65 per share next year. The company pledges to increase its dividend by 5.1 percent per year, indefinitely. If you require a return of 11 percent on...
-
After successfully completing your corporate finance class, you feel the next challenge ahead is to serve on the board of directors of Schenkel Enterprises. Unfortunately, you will be the only...
-
Ragan, Inc., was founded nine years ago by brother and sister Carrington and Genevieve Ragan. The company manufactures and installs commercial heating, ventilation, and cooling (HVAC) units. Ragan,...
-
what is the importance of visionary leadership in attaining a win-win situation during conflict resolution through risk-taking and creating a sense of togetherness?
-
Question 1 Question 2 Why was the National Incident-Based Reporting System (NIBRS) created apart from the Uniform Crime Report
-
How can define Great man theory, Transformational Theory and Visionary Leadership ?
Study smarter with the SolutionInn App