The risky asset and the risk-free asset

Assignment Help Financial Management
Reference no: EM131182630

You invest $1,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 16% and a standard deviation of 20% and a Treasury bill with a rate of return of 6%. The slope of the capital allocation line formed with the risky asset and the risk-free asset is approximately _________.

Reference no: EM131182630

Questions Cloud

Withdraw each month from your account in real terms : You are planning to save for retirement over the next 30 years. To save for retirement, you will invest $1,150 per month in a stock account in real dollars and $540 per month in a bond account in real dollars. How much can you withdraw each month fro..
Computing your firms weighted average cost of capital : Your manager just finished computing your firm's weighted average cost of capital. He is relieved because he says that he can now use that cost of capital to evaluate all projects that the firm is considering for the next four years. Evaluate that st..
What is the present value of the futures contract in dollars : A Treasury bond futures contract settles at 105'8. a. What is the present value of the futures contract in dollars?A Treasury bond futures contract settles at 105'8. What is the present value of the futures contract in dollars? If the contract settle..
Calculate implied value of warrants attached to each bond : Pierre Imports recently issued two types of bonds. The first issue consisted of 10-year straight debt with a 9 percent annual coupon. The second issue consisted of 10-year bonds with a 8 percent annual coupon and attached warrants. Calculate the impl..
The risky asset and the risk-free asset : You invest $1,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 16% and a standard deviation of 20% and a Treasury bill with a rate of return of 6%. The slope of the capital allocation..
After-tax cost of debt capital : You have been given the following facts and assumptions concerning ABC Corp. at December 31, 2013. Yield to maturity on long term government bond is 5.00%. Yield to maturity on company long term government bond is 7.0%. Existing tax rate stands at 35..
Complete portfolio by combining the risk-free asset : Consider a Treasury bill with a rate of return of 5% and the following risky securities: The investor must develop a complete portfolio by combining the risk-free asset with one of the securities mentioned above. The security the investor should choo..
Yield to maturity on company long term government bond : You have been given the following facts and assumptions concerning ABC Corp's at December 31. 2013 Yield to maturity on long term government bond is 5 00% Yield to maturity on company long term government bond is 7 0% Coupon rate on company long term..
Compute earnings per share under the dobermab plan : Mr Katz is in the widget business. He currently sells 2 million widgets a year at $4 each. His variable cost to produce the widgets is $3 per unit, and he has $1,500,000 in fixed costs. Compute earnings per share under the Katz plan. Compute earnings..

Reviews

Write a Review

Financial Management Questions & Answers

  Behavioral critique of the efficient market hypostasis

Assess the credibility of the behavioral critique of the efficient market hypostasis. Provide support for your rationale. Examine the results of technical analysis, and determine whether or not it works. Support your answer.

  Target capital structure calls debt and common equity

For a company whose target capital structure calls for 50% debt and 50% common equity, which of the following statements is CORRECT? The interest rate used to calculate the WACC is the average after-tax cost of all the company’s outstanding debt as s..

  Raising funds for major investment

You are the CFO of ADP and you are raising funds for a major investment. Your strategy is to issues bonds of varying maturities to investors. One of the longer term bonds being issued can be purchased for $25,000.00 per bond and pays $1,900.00 annual..

  Hobbit manufacturing-increase in total market value for firm

Operating income (EBIT) $600 million, Interest expense $0, Tax rate 35%, Debt $0, Cost of equity 7%, WACC 7%. The company has no growth opportunities (g = 0), so the company pays out all of its earnings as dividends. Hobbit can borrow money at a pre-..

  What is her annualized rate of return

Seven months ago, Freda purchased 400 shares of stock on margin at a price per share of $36. The initial margin requirement on her account is 70 percent and the maintenance margin is 40 percent. The call money rate is 4.4 percent and she pays 2 perce..

  What is the company cost of capital-After-tax WACC

A company is 39% financed by risk-free debt. The interest rate is 10%, the expected market risk premium is 8%, and the beta of the company’s common stock is 0.60. What is the company cost of capital? What is the after-tax WACC?

  About the price is right-what is the present value

Much to your surprise, you were selected to appear on the TV show "The Price is Right". As a result of your powers in identifying how many rolls of toilet paper a typical American family keeps on hand, you win the opportunity to choose one of the fol..

  Treasury bond to hold to maturity

If you invested in a long-term U.S. Treasury bond to hold to maturity, which form of risk should most concern you?

  What is apples beta coefficient

Apple Inc.’s annual stock returns for the last five years are: 146.81%, 53.09%, 25.55%, 32.56%, and 8.06%. The S&P 500 Index’s annual returns for the last five years are: 23.45%, 12.78%, 0.00%, 13.41%, and 29.60%. What is Apple’s beta coefficient?

  Expected to pay the dividends

South Side Corporation is expected to pay the following dividends over the next four years: $15, $11, $10, and $6.50. Afterward, the company pledges to maintain a constant 5 percent growth rate in dividends forever. If the required return on the stoc..

  What is your incremental cash flow from selling the machine

You purchased a machine for $1.06 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 35%. If you sell the machine today (after three years of depreciation) for $779,000, what is y..

  What is the book value of assets today

Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $7.2 million. The machinery can be sold to the Romulans today for $4.05 million. Klingon's current balance sheet shows net fixed assets of $3.5 million, current liabilities 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