Question: Question 14. 14. The correlation coefficient between Amazon stock and the market portfolio is 0.7. The standard deviation of Amazon stock is 45% and that

Question 14.14. The correlation coefficient between Amazon stock and the market portfolio is 0.7. The standard deviation of Amazon stock is 45% and that of the market is 25%. Calculate the beta of the Amazon stock. (Points : 3.2)

a. 1.260 b. 2.800 c. 0.315 d. 1.800

Question 15.15. Jacobee Corporation has net income of $35 million per year on net sales of $110 million per year. It currently has no long-term debt, but is considering a debt issue of $40 million. The interest rate on the debt would be 10%. Jacobee Corp. currently faces an effective tax rate of 35%. What would be the annual interest tax shield to Jacobee Corp. if it goes through with the debt issuance? (Points : 3.2)

a. $560,000 b. $1,400,000 c. $8,000,000 d. $20,000,000

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