Compute the covariance

Assignment Help Finance Basics
Reference no: EM1361765

1) You are considering investing in two stocks, Pelts, Inc., that manufactures fur coats, and PITA, Inc., a for-profit animal-rights advocacy group. Pelts and PITA are perfectly negatively correlated. Pelts has variance of 0.09, while PITA's variance is 0.16.

a) What is the covariance between Pelts and PITA?
b) Consider a portfolio that consists of 57% Pelts and 43% PITA. What is the variance of this portfolio?
c) If the risk-free rate is 6%, the market risk premium is 6%, and PITA's expected return is 5%, what is Pelt's expected return in equilibrium?


Reference no: EM1361765

Determine the financial risk

Suppose your corporation has asked you to determine the financial risks of manufacturing 6,000 units of a product rather than purchasing them from a vendor at $66.50 each unit

Determine dollar return

Suppose that IBM stock is selling for $110 per share and that you short sell 200 shares of the stock determine your dollar return if the price of IBM stock drops to $95 per sh

Compute the incremental net income

The Best Manufacturing Corporation is planning a new investment. Financial projections for the investment are tabulated below. Cash flows are in $ thousands, and the corporate

Calculate stock price in one year

The current price of ADM's stock, Po, is $20 and corporation is expected to pay a $2.20 dividend next year. If the appropriate required rate of return for ADM's stock is 15%,

Determine remaining balance on the loan

Robert recently borrowed $20,000 to purchase a new car. The car loan is fully amortized over four years. In other words, loan has a fixed monthly payment, and balance on loan

Deriving the forward rate

Suppose that annual interest rates in the U.S. are 4 percent, while interest rates in France are 6%. According to IRP, what should the forward rate premium or discount of the

Compute depreciation charge

Pemberton Corporation bought a machine costing $300,000 that had an estimate useful life of 6-years and residual value of $18,000. The machine is expected to produce 3,525,000

Prepare a schedule showing unit and total depletion

Cleanburn Coal Corporation bought coal-leasing land that contains 800,000 tons of coal for $21,700,000. Soil test through geologist cost $35,250 for the purchased land, but te


Write a Review

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