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Consider two mutual funds, A and B. The beta for fund A is .60, and the standard deviation of the rate of return = .20.
The beta for fund B. is 1.30 and its standard deviation of the rate of return = .325.
The standard deviation of the market portfolio is .25.
Are these funds as well-diversified as possible?
Minisoft Corporation and Pear, Inc. are the two largest computer companies in the United States. Pending Department of Justice antitrust review, the two corporations plan to merge, renaming their company “Mini-Pear, Inc.”. What rights do the minority..
An asset has had an arithmetic return of 10.9 percent and a geometric return of 8.9 percent over the last 88 years. What return would you estimate for this asset over the next 8 years? 22 years? 29 years? Enter as percentages.
The specialist in a stock you are watching is quoting $49¾ bid and $50¼ offered. The last two trades were both for 100 shares at exactly $50 per share. A "stop loss" order to buy at 50-(STOP), placed right before the last trade of $50 per share, woul..
Suppose Netflix is considering to purchase $5 million of equipment. This equipment will qualify for five years accelerated depreciation beginning in the same year as the capital expenditure. Compute the NAL. Should Netflix buy or lease this equipment..
Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,310,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life.
Use the capital-asset pricing model to predict the return next year of a stock with a beta of 1.0, if you expect the return to holding stocks to be 8 percent on average, and the interest rate on three-month T-bills will be 3 percent. What is the expe..
FITCO Inc. is a Pharmaceutical company which is considering investing in a new equipment for the production of pain-reliever machine for individuals who suffer from cardio vascular diseases. Calculate the initial outlay of the project (no. units and ..
Bates Motors has the following information for the previous year: net income = $200; net operating profit after taxes (NOPAT) = $300; Total assets = $1,000 and total net operating capital = $800. The information for the current year is: net income =$..
KLM Corp. common stock is currently selling for $8 a share. Due to NYSE listing requirements, KLM decided to declare a non-discretionary 2-for-5 reverse stock split. As a result of the split, KLM common stock market price per share will be _____, all..
Quebec, Inc., is purchasing machinery at a cost of $4,310,720. The company’s management expects the machinery to produce cash flows of $892,410, $1,094,160, and $1,927,150 over the next three years, respectively. What is the payback period?
Fun Toy Corporation estimates that there is 30% chance of a recession economy next year, a 40% chance of a normal economy next year, and a 30% chance of a boom economy next year. What is the value of Fun Toy’s debt? What is the value of Fun Toy’s equ..
In the following, assume that the CAPM is true. Denote by rM the return of the market portfolio, βi the beta of security i with the market portfolio, and ρi,M the correlation between security i and the market portfolio M. Find the risk-free rate rf o..
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