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You are given the year-on-year expected return on two stocks, TechCo and RetailCo, which are 4.2% and 1.8% respectively and their corresponding annualized standard deviations are 12.5% and 15%.
You construct a 2-asset portfolio, containing 32% of TechCo and 68% of RetailCo and you calculated that the correlation coefficient between the two stocks is -25%. A more conservative portfolio manager, Tim, then chooses to invest 70% in your portfolio and 30% in a risk-free security. Calculate the standard deviation of Tim’s portfolio.
Alex invested $9,530 in a mutual fund at a time when the price per share was $10. The fund has a load fee of $50. How many shares did she purchase? Alex later sells her shares in the mutual fund for $12 per share. What would her percentage return be ..
The terms of the sale were 4/9, net 36. What is the effective annual rate of interest?
Calculate the price of a 3-month European put option on a non-dividend-paying stock with a strike price of $50 when the current stock price is $50, the risk-free interest rate is 10% per annum, and the volatility is 30% per annum.
Suppose you can borrow money at 10.71% per year (APR) compounded semiannually or 9.12% per year (APR) compounded monthly. Calculate the Effective Annual Rate.
Root Stock Inc. is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $90..
Pearson, Inc. is offering 40,000 shares in an initial public offering. The underwriters have agreed upon a best efforts offering with an offer price of $25 and a 7 percent spread. The underwriters were able to sell 28,500 shares to the general public..
Bridget Morrow is a sophomore at a state college and is running out of money. Wanting to continue her education, Bridget is considering a student loan. Explain her options. How can she best to minimize her Byron cost and maximize her flexibility?
Bond X is non callable and has 10 years to maturity, a 9% semi annual coupon, and a $1000 par value. Your required return on Bond X is 5%, and if you buy it, you plan to hold it for 3 years. You (and the market) have expectations that in 3 years, the..
ABC’s credit terms are 1/7, net 40. Based on experience, 38 percent of all customers take the discount. ABC has annual credit sales of $184,524. What is the average investment in accounts receivable as shown on the balance sheet?
Landmark Coal operates a mine. During July, the company obtained 500 tons of ore, which yielded 250 pounds of gold and 62,500 pounds of copper. The joint cost related to the operation was $500,000. Gold sells for $325 per ounce and copper sells for $..
The Clothing Depot maintains a debt-equity ratio of .50 and follows a residual dividend policy. The firm needs $2,700 for new investments next year. The after-tax earnings this year are $1,700. What is the amount that the Clothing Depot will pay out ..
Your firm is contemplating the purchase of a new $1,036,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $100,800 at the end of that time. At what level of pretax cost ..
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