Risk and rates of return worksheet

Assignment Help Finance Basics
Reference no: EM131113929

Risk and Rates of Return Worksheet

SHOW YOUR WORK AND UNDERLINE YOUR ANSWER FOR EACH OF THE FOLLOWING PROBLEMS

1. In January 4, 2016 the S&P 500 closed at 2,012.66 points. In February 26 of the same year it closed at 1,948.05. What was the return of the market in that period of time?

2. Use the following table to choose the investment that is better compensating investors for the risk they are taking. (Use Sharpe ratio). The risk free rate is 3%.

Stock

Expected return

Standard Deviation

A

10%

5%

B

8%

10%

C

13%

8%

3. You want to create a portfolio that will include 3 stocks. Stock A has an expected return of 8%, stock B has an expected return of 5%, and stock C has an expected return of 3%. What is your expected portfolio return if you invest 20%, 30%, and 50%, respectively, of your money in each stock?

4. Walmart's beta is .28. What is Walmart's required return if the market return is 10% and the risk free rate is 6%?

5. Facebook's beta is 1.85. What is its required return if the market risk premium is 4% and the risk free rate is 2%?

6. An individual has $300,000 invested in a stock with a beta of 1.1; $250,000 invested in a stock with a beta of 1.4; $120,000 in a stock with a beta of 0.5; and $500,000 in a stock with a beta of 0.8. If these are the only investments in her portfolio, what is her portfolio's beta?

7. A stock is expected to earn a 6% return. The stock's beta is 0.7, the risk-free rate is 1% and the market risk premium is 5%. Should you add the stock to your portfolio?

Reference no: EM131113929

Computing the life of the loan

Given a two-year loan of $50,000 and an annual interest rate of 8 percent, how much interest will accrue during the life of the loan? (Assume no principal payments during th

What is the extra return that us investors

Solve for the optimal international portfolio comprising the U.S. and U.K. markets. Assume that the monthly risk-free interest rate is 0.5 percent and that investors can take

Determining the percent rate of return

Over the past 10 years, the dividends of Party Time, Inc. have grown at an annual rate of 15 percent. The current (D0) dividend is $3 per share. This dividend is expected to

Determining the acceptance period

Medianite Manufacturing bought a new machine for $2,538,966. The company expects additional cash flows from the machine of $950,225, $1,058,436, and $1,491,497 over the nex

Safety net for economic downturns

The Helium Corp has just decided to save $10,000 each quarter for the five years as a safety net for economic downturns. The money will be set aside in a separate savings a

Purchase the proceeds from the lottery

Chris Marlowe just won the state lottery which promises to pay him $1,500 per year for 20 years, starting from today, and $1,850 per year for years 21-45, given a 6.75% disc

Calculate the expected total annual return

Calculate the expected total annual return (euro-based) of the current bond portfolio if Sofia decides to leave the currency risk unhedged. Show your calculations. Explain, wi

New business proposal to produce a line

Casey's Cycles manufactures a line of traditional multi-speed road bicycles. Management is considering a new business proposal to produce a line of off-road mountain bikes.

Reviews

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