What is the discount rate
Course:- Financial Management
Reference No.:- EM13942921

Assignment Help
Assignment Help >> Financial Management

Henry, a direct descendant of Jefferson Morgan has inherited $450,000. A financial advisor tells her to invest this amount and target an average of at least 8% return over a 30 years. Henry decides to invest in a Northern Endowment Fund that has had a ten year average return of 8.5%. During the same time, S&P500 has had a 13% return (this is market return). The risk free return is 2% and the beta of the fund is 0.8.

a) What is the discount rate?


b) Would a beta of 1.1 increase her returns?

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
Determine the net present value (NPV) of the project in each of the four possible scenarios. Determine the joint probability of each scenario. Compute the expected NPV of the
Charles Morris Builders Corporation (CMBC) generated $2 million in sales during 2015, and its year-end total assets were $1.5 million. Also, at year-end 2015, current liabilit
Lei Materials' balance sheet lists total assets of $1.16 billion, $132 million in current liabilities, $415 million in long-term debt, $613 million in common equity, and 58 mi
Which of the following statements is most accurate regarding agency problems? An agency problem likely occurs when there is a conflict of interest between owners and agents.
For this discussion, describe how financial managers would choose a capital structure that maximizes the value of the firm, and discuss a scenario under which one yielding a h
Sweet Fruit, Inc. has a $1000 par value bond that is currently selling for $1280. It has an annual coupon rate of 9.90 percent, paid semi annually, and has 10-years remaining
A 30-unit apartment building should last 35 years, when it will need to be either replace or undergo major renovation. Assume the building’s value at 35 years will be 10% of i
Trigen Corp. management will invest cash flows of $1,238,006, $1,143,422, $1,487,955, $818,400, $1,239,644, and $1,617,848 in research and development over the next six years.