Please put the answer in a word document or excel spreadsheet. Thank you - see attached file first.

Calculate the expected return and standard deviation of for single stocks and portfolio

You have estimated the following probability distributions of expected future returns from stocks X and Y:

a) What is the expected return for stock X and Y?

Expected return of X = ??

Expected return of Y = ??

b) What is the standard deviation of expected returns for stock X and Y?

Standard deviation of X = ??

Standard deviation of Y = ??

c) Calculate the expected return and standard deviation of the mix of 50% X and 50% Y.

Expected return of the mix of 50% X + 50% Y = ??

d) Which stock would you consider to be riskier, X, Y, or 50% X + 50% Y? Why? (hint: calculate the coefficient of variation (COV) = standard deviation / expected return and compare.) Hints: please study the slides for the explanation of calculations.

Cov of X = ??

Cov of Y = ??

Cov of ( 50% X + 50% Y) = ??

Which do you pick? ---- ??

2) Capital budgeting decision on new branch

Initial cost of building and equipment is $1 million

Expected to have a useful life of 20 years

At the end of the project the building and its equipment are expected to be sold for a $200,000 salvage value

The building and its equipment will be depreciated over their 20-year life using straight-line depreciation to a zero balance

The building is to be constructed on land leased for $23,000 per year

Net working capital must be increased by $110,000

Annual revenues from the new branch will be $400,000

Of this $400,000 in revenues, $50,000 will be drawn away from the bank?s main office

The new branch will incur about $130,000 per year in other expenses

Both expenses and revenues are expected to remain approximately constant over the branch?s 20-year life

Marginal tax rate is 40%

Cost of capital 9%

Answer the following questions:

1. What is the cash flow for the branch?s 20-year life

2. Calculate the NPV, Profitability index, and Internal rate of return (IRR).

3. Should the project be accepted? Why?

Please put the answer in a word document or excel spreadsheet. Thank you 1) Calculate the expected return and standard deviation of for single stocks and portfolio You have estimated the following probability distributions of expected future returns from stocks X and Y: a) What is the expected return for stock X and Y? Expected return of X = ?? Expected return of Y = ?? b) What is the standard deviation of expected returns for stock X and Y? Standard deviation of X = ?? Standard deviation of Y = ?? c) Calculate the expected return and standard deviation of the mix of 50% X and 50% Y. Expected return of the mix of 50% X + 50% Y = ?? d) Which stock would you consider to be riskier, X, Y, or 50% X + 50% Y? Why? (hint: calculate the coefficient of variation (COV) = standard deviation / expected return and compare.) Hints: please study the slides for the explanation of calculations. Cov of X = ?? Cov of Y = ?? Cov of ( 50% X + 50% Y) = ?? Which do you pick? ---- ?? 2) Capital budgeting decision on new branch Initial cost of building and equipment is $1 million Expected to have a useful life of 20 years At the end of the project the building and its equipment are expected to be sold for a $200,000 salvage value The building and its equipment will be depreciated over their 20-year life using straight-line depreciation to a zero balance The building is to be constructed on land leased for $23,000 per year Net working capital must be increased by $110,000 Annual revenues from the new branch will be $400,000 Of this $400,000 in revenues, $50,000 will be drawn away from the bank's main office The new branch will incur about $130,000 per year in other expenses Both expenses and revenues are expected to remain approximately constant over the branch's 20-year life Marginal tax rate is 40% Cost of capital 9% Answer the following questions: 1. What is the cash flow for the branch's 20-year life 2. Calculate the NPV, Profitability index, and Internal rate of return (IRR). 3. Should the project be accepted? Why