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Concider stocks X and Y
Stock X, Expected Return 0.18, Standard Deviation 0.06, Covariance with market portfolio 0.00108
Stock Y, Expected Return 0.12, Standard Deviation 0.02, Covariance wht market portfolio 0.00036
The correlation between stocks X an Y is 0.2 and the risk-free rate of return is 8%. The market risk premium is 7% and the market porfolio has a standard deviation of 3%.
Calculate the beta for each stock based on the actual observations?
You are choosing between two projects. The cash flows for the project are given in the following table ($ million) : What are the IRRS of the two projects? Why do IRR and NPV rank the two projects differently?
A Lotta Bread Corp. is replacing an entire baking line that was purchased for $420,000 and currentlyhas a book value of $60,000.
If the interest rate in the United Kingdom is 7 percent, the interest rate in the United States is 8 percent, the spot exchange rate is $1.742/£1, and interest rate parity holds, what must be the one-year forward exchange rate?
Until the company has been incorporated it cannot contract or do any other act. Make appropriate use of case law and academic journal articles.
An insurance company issued a $109 million one-year, zero-coupon note at 9 percent add-on annual interest (paying one coupon at the end of the year) and used the proceeds plus $29 million in equity to fund a $138 million face value, two-year commerci..
Obsolete Computer Systems, Inc. wants to emerge as a major producer of computer software. The company has two options: Either it can purchase Upstart Software for $25m now whose products are expected to survive 5 years. As a member of Obsolete’s boar..
Suppose Microsoft projected free cash flow for next year is FCF = $8.75 billion, and due to expected lower revenues and slower growth sales FCF is expected to grow at a constant rate of only 4.5% into the infinite future. The company’s weighted avera..
The expected return on the S&P 500 is 10% and the risk-free rate is 3%. What is the expected return on the investment with a beta of (a) 0.2, (b) 0.5, and (c) 1.4?
The Executive Committee of PLE is debating whether to replace its original tractor model, the PLE-Classic, with a new model, the PLE-Tough, which would appeal to a younger clientele. Whatever tractor chosen will be produced for the next 4 years, afte..
Walker Industries has a bond outstanding with 12 years to maturity, a 9% coupon paid annually, and a $1,000 par value. The bond has a 7% nominal yield to maturity, but it can be called in 4 years at a price of $1,025. What is the bond’s nominal yield..
How much are you willing to pay for one share of this stock if you want to earn 12.5 percent on an equity investment of this level of risk?
A stock has an expected return of 14%, the risk-free rate is 6%, and the market risk premium is 10%. What must the beta of this stock be?
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