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Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns:
Market Return Aggressive Stock Defensive Stock
5% 2% 3.5%
20 32 14
a. What are the betas of the two stocks?
b. What is the expected rate of return on each stock if the market return is equally likely to be 5% or 20%?
c. If the T-bill rate is 8%, and the market return is equally likely to be 5% or 20%, draw the SML for this economy.
d. Plot the two securities on the SML graph. What are the alphas of each?
e. What hurdle rate should be used by the aggressive firm for a project with the risk characteristics of the defensive firm's stock
Elucidate the phenomenon of market foreclosure. Specifically, explain how a vertical merger may "substantially lessen competition or tend to create a monopoly".
Suppose the price of food increases from Px1to Px2. On a clearly labelled graph, illustrate the income and substitution effects of the price change on the consumption of food.
What are the firm's fixed costs? What is the firm's marginal cost? Now suppose other firms in the market sell the product at a price of $10.
Black Diamond Tennis & Golf Club offers golf and tennis memberships to residents of Black Diamond, Ohio, in which there are 2-types of families:
The absolute value of coefficient of the price elasticity of demand.
It is given an offer to split, if you accept this offer you keep the $1, and the other player keeps $19.
What is the optimal level of production of wine decanters? Verify that this level of output maximizes not minimizes profit
The approximate number of years it takes for real GOP pee person in Japan (0 double if the real GDP economic growth rate returns to 3 percent a year and the population growth race is maintained
Think a country A with a population of 220 people; 200 are working age and 180 are in the labour force. Thirty people are without a job and 30 have a part time job.
Limit your reaction to stratigies which can work and reasons for their success.
Suppose you are running a photo copy center that makes illegal copies of the textbook. An illegal copy of the book sells for $10 and you only have one copy machine.
In 1982 to 1984 the base period used for the customer price index, the average earnings of construction workers were $442.74 a week.
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