What is required rate of return of this portfolio

Assignment Help Financial Management
Reference no: EM131332846

Dalia’s Biomedical Supplies has a stock with a beta of 0.85 and an expected return of 10%. Assume that short-term US treasury bills are currently earning 3% and the market risk premium is 5%

a) assuming an equal investment in the two assets, what is the expected return of the portfolio?

b) if the portfolio beta is 0.6, what are the stock weights?

c) what is the required rate of return of this portfolio?

Reference no: EM131332846

Questions Cloud

Percentile for the distribution of exercise time : (a) Find the 75th percentile for the distribution of exercise time per week. (round the answer to 2 decimal places) (b) What is the probability that a randomly selected adult has more than 5 hours of exercise per week? (round the answer to 4 deci..
Which will not pay dividends for three years : There is a stock, which will not pay dividends for 3 years. Afterward, it will begin paying $4 out of a profit of $10 per share. We estimate that the firm will have an ROE of .04. The default free rate is 2%, the market premium is 7%, and the stock r..
Interval estimate of the proportion of auto accidents : An insurance company checks police records on 1200 randomly selected auto accidents and notes that teenagers were at the wheel in 180 of them. Construct a 90% confidence interval estimate of the proportion of auto accidents that involve teenage dr..
Prepare a paper on citizen-centric reporting : Prepare a paper on Citizen-Centric Reporting. In your paper, discuss the purpose of Citizen-Centric Reporting, why you believe such reports are necessary, and what the AGA recommends as the format and content of the report.
What is required rate of return of this portfolio : Dalia’s Biomedical Supplies has a stock with a beta of 0.85 and an expected return of 10%. Assume that short-term US treasury bills are currently earning 3% and the market risk premium is 5%. assuming an equal investment in the two assets, what is th..
Find the variance of ei and of eii : Find the variance of EI and of EII when there are n buyers, whose private values are independent and uniformly distributed over [0, 1].
Null hypothesis and the alternative hypothesis : (a) Identify the null hypothesis and the alternative hypothesis. (b) Determine the test statistic. Show all work; writing the correct test statistic, without supporting work, will receive no credit. (c) Determine the P-value for this test. Show..
What is the amount and character of the gain or loss : What is the amount and character of the gain, loss or income that must be recognized by you as a result of the distribution of the SubCo stock?
Generate over the projects lifetime in british pounds : Assume that Salisbury Corporation is considering the establishment of a subsidiary in England. The initial investment required by the parent is $40,000,000. If the project is undertaken, Salisbury would terminate the project after four years. Listed ..

Reviews

Write a Review

Financial Management Questions & Answers

  Performance is measured

Performance is measured by

  The normative theories of business ethics

Select one of the normative Theories of Business Ethics (either Stockholder Theory, Stakeholder Theory or Social Contract Theory) and describe the basic tenets of the framework and explain how it can be applied. ?

  What proceeds will they receive on sale of the property

A house is selling for $150,000. A deposit of $20,000 was made when the sales contract was signed. The down payment is 30% and the balance will be financed with a 25-year mortgage at 4.25% and 4 discount points. If the sellers are responsible for the..

  Pays interest forever and has no maturity date

A bond that pays interest forever and has no maturity date (perpetual or consol bond) is similar to a 1) no growth common stock and 2) a preferred stock in what ways?

  Calculate financial ratios

It is often stated that anyone with a pencil can calculate financial ratios, but it takes a brain to interpret them. What kinds of things should the analyst keep in mind when evaluating the financial statements of a given firm?

  Responsible for spades sale of defective goods

Sam Spade sold Bart Black goods on credit for $1,000. Spade then assigned the account receivable to Arte Ashe. Black discovered that the goods were defective--and told Ashe they were worth only $300. Ashe demanded $1,000 from Black because, said he, ..

  Use black-scholes model to find the price for call option

Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is $28, (2) strike price is $35, (3) time to expiration is 2 months, (4) annualized risk-free rate is 6%, and (5) variance of stock ret..

  Firms capital funding should be debt financing

McKnights Inc. uses a combination of common stock, preferred stock, and debt financing. The company wants preferred stock to represent 6 percent of the total financing. It also wants to structure the firm in a manner that will produce a weighted aver..

  Correctly states the resulting change in the equity accounts

Why should managers assume they will receive a fair price for any new shares that their firm issues? A firm just issued 15,000 new shares of stock with a market price of $14 per share and par value of $2 per share. Which one of these correctly states..

  Standard deviation of expected returns-security is riskier

Stock A has an expected return of 7%, a standard deviation of expected returns of 35%, a correlation coefficient with the market of 0.3, and a beta coefficient of 0.5. Stock B has an expected return of 12%, a standard deviation of returns of 10%, a 0..

  What is the weighted average cost of capital

The current capital structure based on market values is 20% debt, 10% Preferred Stock, and 70% Common Equity. The target capital structure is 50% debt and 50% common equity. What is the weighted average cost of capital for the project?

  What is the maximum amount of cash that the global satellite

Global Satellite Corp. reported net sales of $450 million last year and generated a net income of $99 million. Last year's accounts receivable increased by $14 million. What is the maximum amount of cash that the Global Satellite Corp. received from ..

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