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An investor wants to form a two asset portfolio consisting of Treasury bills with a return of 1.5% and a risky portfolio with a risk premium of 12.7% and a standard deviation of 22%. The investor wants the standard deviation of the two asset portfolio to be no more than 15%.
a. What fraction y of the investor’s funds should be invested in the risky portfolio?
b. What is the expected return of the two asset portfolio?
geithner amp bernanke amid the global financial crisis1. from the breadth and depth of the economic downturn it was
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Suppose a company will issue new 25-year debt with a par value of $1,000 and a coupon rate of 8%, paid annually. The tax rate is 40%. If the flotation cost is 3% of the issue proceeds, then what is the after-tax cost of debt? Disregard the tax shield..
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