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A portfolio that combines the risk-free asset and the market portfolio has an expected return of 7.2 percent and a standard deviation of 10.2 percent. The risk-free rate is 4.2 percent, and the expected return on the market portfolio is 12.2 percent. Assume the capital asset pricing model holds.
What expected rate of return would a security earn if it had a .47 correlation with the market portfolio and a standard deviation of 55.2 percent? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Last year Star Inc paid a dividend of $1.50 on its common stock last year. You expect the dividend will increase at 15% each year over the next three years; but after that, a normal growth rate of 5% is expected for the foreseeable future. The stoc..
Create a diagram of the U.S. banking system and the Federal Reserve System. Include special financial services of the banking system in your diagram. Be creative in this activity. Pretend you have been asked to teach the structure and interrelationsh..
Backwater Corp. has 8 percent coupon bonds making SEMIANNUAL payments with a YTM of 7.2 percent and selling at $1060. How many years for these bonds have lefts until they mature?
Which of the following is a reason why risk analysis is an important part of capital budgeting?
Carlton Industries is considering a new project that they plan to price at $74.00 per unit. The variable costs are estimated at $39.22 per unit and total fixed costs are estimated at $12,085. The initial investment required is $8,000 and the project ..
Quetzalcoatl and Tonantzin each take out a 17-year loan of $L. Quetzalcoatl repays his loan using the amortization method, at an annual effective rate of i. He makes an annual payment of $500 at the end of each year.
ABC Corp.'s bonds currently sell for $1,180 and have a par value of $1,000. They pay a $50 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,100. What is their yield to maturity (YTM)?
RAK Co. wants to issue new 19-year bonds for some much-needed expansion projects. The company currently has 6 percent coupon bonds on the market that sell for $1,080, make semiannual payments, and mature in 19 years. What coupon rate should the compa..
Broussard Skateboard's sales are expected to increase by 25% from $8.8 million in 2016 to $11.00 million in 2017. Its assets totalled $4 million at the end of 2016. Baxter is already at full capacity, so its assets must grow at the same rate as proje..
Weston Mines has a cost of equity of 20.8 percent, a pretax cost of debt of 9.4 percent and a return on assets of 17.1 percent. Ignore taxes. What is the debt-equity ratio?
The capital budgeting decision model that utilizes all the discounted cash flow of a project is the ________ model, which is one of the single most important models in finance.
A Company has 12,000,000 in sales. COGS are 40% of sales. Operating costs are $1,200,000plus depreciation expense of $80,000 and interest expense $80,000. Tax rate is 40%. They have 1,000,000 shares of stock outstanding. What is their net income? If ..
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