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Use these data for the following questions:
You manage a risky portfolio with expected rate of return of 18% and standard deviation of 28%. The T-bill rate (lending rate) is 8% and borrowing rate is 10%. Your client’s degree of risk aversion is A = 3.5.
a. Draw the CAL (capital allocation line with different borrowing and lending rates) on an expected return-standard deviation diagram.
b. Calculate the Sharpe-Ratio (reward-to-variability ratio) of the risky portfolio assuming you can borrow and lend at the same rate, 8%.
c. What proportion, y, of the total investment should be invested in your fund?
d. What is the expected return and standard deviation of the rate of return on your client’s optimized portfolio?
Keven Winthrop is saving for an Australian Vacation in three years. He estimates that he will need $5000 to cover his airfare and all the other expenses for a Week-long holiday in Austarilia if he can invest his money in an S&P 500 equity index that ..
A stock has an expected return of 15.5 percent, a beta of 1.50, and the expected return on the market is 12.1 percent. What must the risk-free rate be?
Shadow Corp. has no debt but can borrow at 6.9%. The firm’s WACC is currently 8.7%, and the tax rate is 35%. What is Shadow’s cost of equity? (Percentage). If the firm converts to 35% debt, what will its cost of equity be? (Percentage) If the firm co..
saven travel corporation is considering several investment opportunities in order to diversify its operations. mr.
A bond has a coupon rate of 12 percent and 14 years until maturity. If the yield to maturity is 9.3 percent, what is the price of the bond?
Critique of Post (Provided Assistance or Asked a Question that displayed mastery of concepts) Completed in an Interactive Manner
This will take a little research on the Internet. Why may the bell curve be an inappropriate tool for looking at market risk? Find out what Mandelbrot (The Mis Behvior of Markets) and Taleb (The Black Swan) have to say.
The Raven Co. has just gone public. Under a firm commitment agreement, Raven received $15.30 for each of the 15 million shares sold. The initial offering price was $18.00 per share, and the stock rose to $20.10 per share in the first few minutes of t..
Describe the basic features and characteristics of bonds. How can bonds be secured? What is the difference between a callable bond and a convertible bond?
Disposition effect is the tendency of individual investors to
Calculate the historical growth rate in earnings and calculate the next expected dividend per share, D1 - calculate the value of Kendra's operations.
First, describe several different fixed costs and variable costs associated with operating an automobile. Next, assume that you would like to travel from Los Angeles to New York City by either car or plane. Which costs would you take into account in ..
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