Calculate the expected return on each share

Assignment Help Corporate Finance
Reference no: EM1346311

The following table provides the share return forecasts and associated probabilities for Advanced Limited and Bright Limited.

Advanced Limited Bright Limited
Return (%) Probability (%) Return (%) Probability (%)
15.5 30 20.3 20
12 30 10.5 50
9.5 40 7 30

a. Calculate the expected return on each share.

b. Calculate the variance and standard deviation for each share.

c. Suppose a portfolio comprised of 60% investment in Advanced Limited and 40% investment in Bright Limited can be constructed.
An analyst has estimated that the correlation coefficient of the two-asset portfolio is -0.50, calculate the return and standard deviation of this portfolio. and draw your conclusion.
Compare your answer with those reported in parts a. and b.

 

Reference no: EM1346311

Questions Cloud

Multiple choice questions on investments in stock market : A stock portfolio is similarly allocated among Stock A, B, & C. Stocks A, B, & C have betas of 1.9, 1, and 0.57, respectively. The market has just risen 4 percent.
Illustrate causes changes in expenditure components of gdp : Illustrate what do you think causes changes in each of the expenditure (spending) components of GDP thereby causing changes in our economy's output, employment, and income levels.
Find effective annual interest rate : The beta of Microsoft stock is 1.2, where risk free rate of return is 4%. Suppose that the expected return on the market is 16%.
Elucidate salary differential between black -white teachers : Assume there is a central city school district in which the student population is predominantly black. What will there be a salary differential between black and white teachers.
Calculate the expected return on each share : The given table provides share return forecasts & associated probabilities for Advanced Limited & Bright Limited.
Evaluation of investment alternatives : In Whitney Houston's will, she leaves her daughter, Bobbi Kristina, 20 million dollar. Bobbi Kristina goes to Body Guard Bank where her Frank Farmer, financial adviser, recommends that she use a discount rate is five percent.
What would happen among these conditions : Primary, assume all retailers sell the basic version of Vista also Circuit City were to raise the price at which it sells Vista.
Explain how health care providers control expenditures : Explain how do health care providers control expenses for health care? Assume reimbursement rates to physicians under all payers are limited by law.
Elucidate the balance sheet balances for assets : Elucidate the balance sheet balances if these are the only assets and liabilities. Supposing that the people hold no currency, what happens to each of these values.

Reviews

Write a Review

 

Corporate Finance Questions & Answers

  Average price-earnings ratio

What is the value per share of the company's stock

  Explain the type of research design

As we have recently experienced, the instability in the price of gasoline has created sudden increases in values. Mostly these rises are from changes in supply, but can the gas firms pass all the increases along to consumer?

  Show the change in the financial environment

Find one dilemma in finance will assist financial managers to overcome and state exactly how managers will resolve it.

  Write a paper using peer reviewed journal articles

Write a paper using peer reviewed journal articles on the topic.

  Determine the expected payoff to debt holders

JR Industries has a 20 million dollar loan due at the end of year & under its current strategy its assets will have a market price of only 15 million dollar when the loan comes due.

  Determine the expected return

Determine the Expected Return by investors at FPL Group?

  Calculate the future value of stock

A share of stock sells for 53 dollar today. The beta of the stock 1.2, & expected return on the market is 12 percent. The stock is expected to pay a dividend of 1.10 dollar in one year.

  How much should you place in the retirement fund

How much should you place in the retirement fund each year for the next 20 years to reach your retirement goal, assuming you can earn 12% per year on your retirement fund investment? Show your formulas and input

  Selecting the best alternative

The R. Morin Construction Corporation requires to borrow $100,000 to help finance cost of a new $150,000 hydraulic crane used in firm's commercial construction business.

  Evaluate ten financial ratios

Calculation of financial ratios - Evaluate the following ten (10) financial ratios and provide a one sentence explanation of the analytic use of each ratio test. Show your formulas and input. Accuracy to two decimal points is sufficient.

  Prepare a spread sheet model

Prepare a spread sheet model for the client that determines NPV/IRR with and without tax.

  Questions based on balance sheet data

Multiple Choice questions based on balance sheet data and An accounting time period that is one year in length is called and One of the accounting concepts upon which adjustments for prepayments and accruals.

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