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Jordan Jones (JJ) and Casey Carter (CC) are portfolio managers at your firm. Each manages a well-diversified portfolio. Your boss has asked for your opinion regarding their performance in the past year. JJ’s portfolio has a beta of 0.7 and had a return of 8.5%; CC’s portfolio has a beta of 1.4 and had a return of 9.5%. Which manager had better performance? Why? (Assumer the risk-free rate is 4% and the market risk premium is 5%). (12 pts)
Given a normal distribution, assume you want to earn a rate of return that plots more than three standard deviations above the mean. What is your probability of earning such a return in any one year?
Which of the following risk-free, zero-coupon bonds could be bought for the lowest price?
You have chosen biology as your college major because you would like to be a medical doctor. However, you find that the probability of being accepted into medical school is about 10 percent. If you are accepted into medical school, then your starting..
What is the change in the NVP of a one-year project if fixed cost are increased from $400 to $600, the form is profitable, has a 35% tax rate, and employs a 12% coast of capital?
Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 13.1% and 16.5%, respectively. The beta of A is .8, while that of B is 1.8. If you currently hold a market index portfolio, what woul..
The marginal tax rate for these three firms averages 40 percent. The risk-free rate is 8 percent, and the expected market risk premium is 8.3 percent. Should USR undertake the project?
Gramling Inc. is considering an investment in new operating equipment with a 15-year life. The new equipment will cost $300,000 and a one-time cost of $15,000 will be incurred to remove the old equipment and install the new equipment. Should Gramling..
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 10 percent. Project A s Cash flow from year 0 to year 3: -1000, 400, 40..
Great Wall Pizzeria issued 8-year bonds one year ago at a coupon rate of 6.1 percent. If the YTM on these bonds is 7.5 percent, what is the current bond price?
Compute the unit sales price at which Blake must sell its product in the current year in order to earn a budgeted target profit of £200,000 - Calculate a value in response Unhappy about the prospect of a price increase, Blake's sales manager wou..
A project has cash flows of $15,000, $10,000, and $5,000 in 1, 2, and 3 years, respectively. - If the prevailing interest rate is 15%, would you buy the project if it costs $25,000?
1. Smith Company and Jones Company each sell 12,000 bottles at $ 3.00 per bottle. Production costs are $9,000 fixed costs plus $1 per bottle. Calculate the operating income (EBIT) for both companies. Using the information in Exercise 1, calculate the..
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