Assuming an equally weighted portfolio including stocks

Assignment Help Financial Management
Reference no: EM13929511

Assuming an equally weighted portfolio including the following three stocks (MRK, GOOG and XOM), what should one’s required return be for this portfolio using the Capital Asset Pricing Model? Merck & Co. (MRK)- Beta= 0.50 Google Inc. (GOOG)- Beta= 1.14 Exxon (XOM)- Beta= 0.80 Note: the 10 year Treasury bond yield is 2.71% (proxy for nominal risk-free rate) and the average return on the market, as measured by the S&P500 is 12.11%.

Reference no: EM13929511

Questions Cloud

The incremental revenues for this situation : Carry-ALL plans to sell 1,300 carriers next year and has budgeted sales of $46,000 and profits of $22,000. Variable costs are projected to be $20 per unit. Michael Co. offers to pay $23,900 to buy 680 units from Carry-ALL. Total fixed costs are $7,00..
Which bond has current yield that exceeds yield to maturity : Determine the current market prices of the following $1,000 bonds if the comparable rate is 10% and answer the following questions. Which bond has a current yield that exceeds the yield to maturity? Which bond may you expect to be called? Why?
Why believe health care spending in united states is so high : In 2013, health spending in the United States exceeded $2.8 trillion, which is approximately 17.9% of the U.S. gross national product (GDP) (Centers for Medicare and Medicaid Services, 2011). Why do you believe health care spending in the United S..
What will be your holding period return on the investment : Six months ago, you purchased a tract of land in an area where a new industrial park was rumored to be planned. If you accept this offer, what will be your holding period return on this investment?
Assuming an equally weighted portfolio including stocks : Assuming an equally weighted portfolio including the following three stocks (MRK, GOOG and XOM), what should one’s required return be for this portfolio using the Capital Asset Pricing Model? Merck & Co. (MRK)- Beta= 0.50 Google Inc. (GOOG)- Beta= 1...
What is the stocks expected price four years from today : A stock is expected to pay a dividend of $4.00 at the end of the year and it should continue to grow at a constant rate of 6% a year. If its required return is 12%, what is the stock’s expected price 4 years from today?
How crime rates are calculated : How are the statistical variables such as mean, mode, and median utilized in analyzing criminal data? Explain how crime rates are calculated and utilized to address specific issues or problems with the data sets
What bid price should you set for the contract : Your company has been approached to bid on a contract to sell 4,900 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. Additionally..
What is an s corporation : What is an S corporation? What do you think is the reason for the 70 percent corporate-dividend exclusion? What are the differences between the operating income, capital gains income, and dividend income of a corporation?

Reviews

Write a Review

Financial Management Questions & Answers

  Cost of trade credit and accounts payable

Calculate the nominal annual cost of nonfree trade credit under each of the following terms. Assume payment is made either on the due date or on the discount date. Assume 365 days in year for your calculations. A chain of appliance stores, APP Corpor..

  What is the firms after-tax cost of debt

5 years ago, Barton Industries issued 25-year noncallable, semiannual bonds with a $1,200 face value and a 8% coupon, semiannual payment ($48 payment every 6 months). The bonds currently sell for $845.87. If the firm's marginal tax rate is 40%, what ..

  What is your monthly repayment

Suppose that your unsubsidized Stafford loans plus accumulated interest total $ 33000 at the time you start repayment, the interest rate is 8% APR, and you elect the standard repayment plan of a fixed amount each month for 10 years. What is your mont..

  What is the fundamental function of the insurance company

What is the fundamental function of the insurance company--- in other words, what is it the insurance company does that makes the insurance mechanism work? A. It pools those insured’s having similar risks, and predicts the losses that those in the po..

  Calculate the net present value of the new purchase option

David Co. produces all-terrain vehicles (ATVs). The once successful line is no longer selling well, so the company is considering production of a new improved 4 passenger ATV. This can be done by buying needed production equipment. The after tax cash..

  Payable over five years with monthly payments

A loan of 100,000 is payable over five years with monthly payments of 60,000 commencing one month after the inception date. The loan repayment is 2,000 per month and the nominal rate 10 per cent. How much capital remains at the end of five years? bui..

  Timeline detailing stream of cash flows

Consider the following timeline detailing a stream of cash flows: If the current market rate of interest is 8%, then the present value of this stream             of cash flows is closest to:

  Quarters forecast sales

The Thakor Corporation’s purchases from suppliers in a quarter are equal to 70 percent of the next quarter’s forecast sales. The payables period is 60 days. Wages, taxes, and other expenses are 30 percent of sales, and interest and dividends are $80 ..

  The origination of a home mortgage loan is considered

The origination of a home mortgage loan is considered to be a

  Calculated his return on investment

George bought an investment one year ago and just calculated his return on investment. He found that his purchasing power has increased by 15% as a result of his investment. If the inflation over the period was 4%, his _______________.

  What is the annual loan payment

The S Company is considering the acquisition of a new processor used in its operation. The processor has an installed cost of $55,000 and is expected to have a useful life of 5 years. If purchased, the firm would borrow the entire $55,000 at an inter..

  What was its interest expense

Molteni Motors Inc. recently reported $8 million of net income. Its EBIT was $15 million, and its tax rate was 36%. What was its interest expense?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd