Beta and the expected return on the proposed portfolio

Assignment Help Financial Management
Reference no: EM131187897

An investor currently has all of his wealth in Treasury bills. He is considering invest- ing one-third of his funds in General Electric, whose beta is 1.30, with the remainder left in Treasury bills. The expected risk-free rate (Treasury bills) is 6 percent and the market risk premium is 8.8 percent. Determine the beta and the expected return on the proposed portfolio.

Reference no: EM131187897

Questions Cloud

Publically traded health care organizations : Suppose you are a newly appointed CFO of your chosen health care organization. One of your first tasks is to conduct an internal financial analysis of the organization. Conduct a brief financial analysis and review of the chosen company’s financial s..
Replacing deposit drain with interest-bearing liabilities : A DI has assets of $10 million consisting of $1 million in cash and $9 million in loans. The DI has core deposits of $6 million, subordinated debt of $2 million, and equity of $2 million. What will be the size of the DI after the drain if the DI uses..
Cost of capital for low depot : You have recently been hired by Low Depot, Inc. (LDI) in its relatively new treasury management department. LDI was founded eight years ago by Joe Lowe. Joe found a method to manufacture a cheaper battery operated saw that will hold a larger charge. ..
Equity capital using arithmetic and geometric growth rates : Suppose Powers Ltd. just issued a dividend of $1.20 per share on its common stock. The company paid dividends of $.85, $.92, $.99, and $1.09 per share in the last four years. If the stock currently sells for $53, what is your best estimate of the com..
Beta and the expected return on the proposed portfolio : An investor currently has all of his wealth in Treasury bills. He is considering invest- ing one-third of his funds in General Electric, whose beta is 1.30, with the remainder left in Treasury bills. The expected risk-free rate (Treasury bills) is 6 ..
Create portfolio that has an expected return : You have $100,000 to invest in either Stock D, Stock F, or a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 12.3 percent. Assume D has an expected return of 15.8 percent, F has an..
Pure discount bonds and mature in exactly one year : Assume bond 1 and bond 2 are both pure discount bonds and mature in exactly one year and two years, respectively. If the bonds have $1,000 par values and investors desire 5% return during the next year and a 7.5% annualized return during the next two..
What is the company current stock price : The Francis Company is expected to pay a dividend of D1 = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company's beta b = 1.15, the market return rM = 10%, and t..
Provide the journal entry needed after one year : In order to expand business, the management of Vereos Inc. decided to issue long term notes payable for $50,000. The note will be paid over ten years with payments of $5,000 plus 12% interest. Provide the journal entry needed after one year for the f..

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is the relationship between the value of an annuity

Present value and Interest Rates/ what is the relationship between the value of an annuity and the level of interest rates? Suppose you just bought an eight-year annuity of $400 per year when interest rates are 10 percent per year. What happens to th..

  Logical approach to financing

In 2014, Dr. Payne bought a massage machine that provided a return of 7 percent. It was financed by debt costing 5 percent. In 2015, Dr. Payne came up with a heating compound that would have a return of 14 percent. Is Dr. Payne following a logical ap..

  What are the net cash flows associated with the project

Great Lakes Clinic has been asked to provide exclusive healthcare services for next year’s World Exposition. Although flattered by the request, the clinic’s managers want to conduct a financial analysis of the project. An up-front cost of $160,000 is..

  British pound sterling

Based on Citibank's direct American quotes of $1.8419-28 in New York, at what price may you purchase US Dollars in London based on European terms? State your answer in GBP (British pound sterling) to four decimal points (e.g. 0.5020).

  What is the financial break-even level for the project

You are considering investing in a company that cultivates abalone for sale to local restaurants. Use the following information: Sales price per abalone = $34.80 Variable costs per abalone = $5.90 Fixed costs per year = $373,000 Depreciation per year..

  Market value weights assets liability and equity cash

WACC The Patrick's Company's year-end balance sheet is shown below. Its cost of common equity is 16%, its before-tax cost of debit is 13%, and it marginal tax rate is 40%. Assume that the firms long term debt sells at par value. Calculate Patrick's W..

  Using the profitability index when evaluating projects

A company is using the Profitability Index (PI) when evaluating projects. You have to find the PI for the company's project, assuming the company's cost of capital is 9.5%. The initial outlay for the project is $379,000. The project will produce the ..

  What is the yield to maturity of bond

A Japanese company has a bond outstanding that sells for 93 percent of its ¥100,000 par value. The bond has a coupon rate of 6 percent paid annually and matures in 16 years. What is the yield to maturity of this bond?

  Draft an income statement and statement of cash flows

On January 3, 2013 Mandy MacMahaninvested $500,000 to open her first restaurant Alabama Barbecued Chicken in her hometown in Alabama.  Her town is known to be a trucker stop and a tourist destination as it has several antique and preserved landmarks ..

  What is the current fair value of the stock to investors

The Storico Company's most recent annual dividend is $2.50 per share. It is expected that Storico's dividend will grow at 13% per year for the next three years and then settle down to 8% per year, indefinitely. What is the current fair value of the s..

  Determine the maximum amount he could withdraw

A man wants to deposit $50,000 now and $60,000 at the end of six years in a bank that pays 12% interest compounded semi annually. He wants to withdraw an amount every year for the first six years and to withdraw exactly $1,500 more for the following ..

  Discounted cash flow approach-what is its cost of equity

The earnings, dividends, and common stock price of Shelby Inc. are expected to grow at 5% per year in the future. Shelby's common stock sells for $29.50 per share, its last dividend was $1.80, and the company will pay a dividend of $1.89 at the end o..

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