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The expected return on the Market Portfolio M is E(rM)=15%, the standard deviation is ?M=25% and the risk-free rate is rf=5%. The CAPM is assumed to hold.
a) Draw on a diagram the Capital Market Line derived from the above data. Make sure to clarify the intercept and the slope.
b) Compute the expected return of two well-diversified portfolios (i.e. portfolios on the CML), one with st.dev of 18%, and the other with st.dev of 30%.
c) Suppose that a portfolio with a beta of 0.9 has an expected return of 15%. Is this compatible with the CAPM? Explain carefully.
Can you tell me what are the most important factors that drive the fluctuation in the short term stock market prices, and why do you think that they do drive short term securities price fluctuations?
An asset used in a 4-year project falls in the 5-year MACRS class (MACRS Table) for tax purposes. The asset has an acquisition cost of $16,554,000 and will be sold for $3,738,000 at the end of the project.
The firm's equity has a beta of 1.5, and the expected market return is 15%. The tax rate is 30% and the WACC is 15%. What is the risk-free rate?
Marisa has a policy with replacement price coverage and 80 percent co-insurance, & has a loss of $100,000 on her house. The replacement price is $400,000 & total policy coverage is $300,000.
A firm's bonds have a maturity of 12 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 6 years at $1,210, and currently sell at a price of $1,370.99.
Calculate the value of security and Value the financial instrument below using excel functions
Objective type question on time value of money and What is the effective annual rate
Computation of after-tax cost of debts and weighted average cost of capital and The capital structure of Dartex Industries and the pretax cost of capital for each component are shown
An invesment offers to pay you 12% over the next year. You expect inflation to be 2.5% over that same year. How much will your purchasing power increase if you make this investment?
Following are 10-quarters of return data for Barboo Associates Stock, as well as return data during the same period for a broad stock market index.
Durkin Cement purchases on terms of 2/15, net 30 days. It does not take discounts and it typically pays 68 days after the invoice date. Net purchases value to $720,000 per year.
Total costs were $72,200 when 25,000 units were produced and $97,500 when 35,000 units were produced. Use the high-low method to find the estimated total costs for a production level of 32,000 units.
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