What is investment in risk-free asset

Assignment Help Financial Management
Reference no: EM131346236

You want to create a portfolio equally as risky as the market, and you have $1,400,000 to invest. Consider the following information:

Asset                       Investment                       Beta

Stock A                            $280000                     0.80

Stock B                            $350000                     1.25

Stock C                                                                   1.50

Risk-free asset

Required:

What is the investment in Stock C? (Do not round your intermediate calculations.)

What is the investment in risk-free asset? (Do not round your intermediate calculations.)

Reference no: EM131346236

Questions Cloud

An all-equity firm is considering the projects : An all-equity firm is considering the following projects: Project Beta Expected Return W .70 11% X .95 13 Y 1.05 14 Z 1.60 16 The T-bill rate is 5 percent, and the expected return on the market is 12 percent. Which projects have a higher expected ret..
The cost of debt capital for a firm : The cost of debt capital for a firm
Monthly payments occurring one year from today : You recieve a payment today of $2,000,000, and then monthly payments of $35,000 each for 4 years (48 total monthly payments), with the first of the monthly payments occurring one year from today. If you use a discount rate of 2.28% APR with monthly c..
What is the present value as of today : You recieve a payment today of $2,000,000, and then monthly payments of $35,000 each for 4 years (48 total monthly payments), with the first of the monthly payments occurring one year from today. If you use a discount rate of 2.28% APR with monthly c..
What is investment in risk-free asset : You want to create a portfolio equally as risky as the market, and you have $1,400,000 to invest. What is the investment in risk-free asset? What is the investment in Stock C?
The percentage of sales forecasting method : The percentage of sales forecasting method is used by management to forecast the amount of
Use the net present value method : Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range (ADR). The asset will cost $120,000, and it will produce earnings before depreciation and taxes of $37,000 per year f..
Expansion project-requires initial fixed asset investment : Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.43 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be w..
Use of accounts payable financing : Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt–equity ratio of .62. It’s considering building a new $71.7 million manufacturing facility. A new issue of common stock. If the tax r..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Requires the calculation of the firms market interactions

The following question requires the calculation of the firm's market interactions through a rights offering provided to its shareholders and their maintained proportions of shares. How many rights will DMZ grant to its existing shareholders? What sho..

  Dividends are expected to grow at rate

Janicex Co. is growing quickly. Dividends are expected to grow at a rate of 24 percent for the next three years, with the growth rate falling off to a constant 6 percent thereafter. If the required return is 11 percent and the company just paid a div..

  The final payment the bank will require you to make is

You have a loan outstanding. It requires making three annual payments of $1,000 each at the end of the next three years. If the interest rate on the loan is 5%?, what final payment will the bank require you to make so that it is indifferent to the tw..

  What is the projects year zero net cash flow

Quad Enterprises is considering a new three year expansion project that requires an initial fixed asset investment of 2.85 million. The fixed asset will be depreciated straight-line to zero over its three year tax life. If the tax rate is 34 percent ..

  Assume interest is compounded monthly

You need to save a total of $12,000 in order to buy a new boat. You are starting with no savings, but you will be able to deposit $40 per month. How long do you need to save in order to reach your goal? In excel, compute and graph the number of years..

  Revolving line of credit-what is the effective annual rate

A firm has established a revolving line of credit for $900,000 with a bank at a rate of prime plus 2%. There is an annual fee of 1/2% on any unused funds. Interest is discounted on loans. Prime was 5% when the agreement was made. Assume the firm deci..

  At what contract price will you get a margin call

On Friday, December 12, the March 2016 S&P Index futures contract (i.e., the S&P contract which expires in March of next year) closed at 2000, down 40 points on the day. The value of the contract is set at 250 × the index. How much value did each con..

  What is the invoice price of the bond

A bond with a coupon rate of 6% makes semi annual coupon payments on January 15 and July 15 of each year. The Wall Street Journal reports the ask price for the bond on January 30 at 100:05. What is the invoice price of the bond? The coupon period has..

  Identify the types of economic considerations

Identify the types of economic considerations that would influence profitability in making the choice between the present production approaches versus making the decision to shift to a "level loading" set of processes. (15%)

  Evaluate stockholder required return

If the appropriate discount rate is 12% and the tax rate is 40%, which copier should be selected?  Why?  Be sure to quantify your answer.

  Opportunity cost associated with using the unused capacity

You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product,..

  Explain the company wishes to know the market value

An oil company has paid $100,000 for the right to pump oil on a plot of land during the next three years. A well has already been sunk and all other necessary facilities are in place. The land has known reserves of 60,000 barrels. The company wish..

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