Expected return on well-diversified portfolio

Assignment Help Financial Management
Reference no: EM13814591

Suppose you are working with two factor portfolios, portfolio 1 and portfolio2. The portfolios hace expected returns of 12% and 9%, respectively. Based on this information, what would be the expected return on well-diversified portfolio A, if A has a beta of 1.10 on the first factor and .75 on the second factor? The risk-free rate is 2%.

Reference no: EM13814591

Questions Cloud

Quantification of decision rules in a healthcare environment : What do you consider to be the key issues for quality improvements in the NHS quality-improvement program as it goes forward? What do you consider to be the strengths and weaknesses of the effort to improve the development of QOF indicators over the ..
Axis of the figure and intercept for market security line : The risk-free interest rate 2% and the mean return on the market portfolio of risky assets is 8%. You are analyzing three individual stocks. The first has a mean return of 5.5% and a beta of 0.5. The second has a mean return of 6.5% and a beta of 0.7..
The bonds yield to maturity : (Year to Maturity) A(n) 8 year bond for Kathy Corporation has a market price of $700.00 and a par value of $1000.00. If the bond has an annual interest rate of 6 percent, but pays interest semi annually, what is the bond's yield to maturity?
Expected return on well-diversified portfolio : Suppose you are working with two factor portfolios, portfolio 1 and portfolio2. The portfolios hace expected returns of 12% and 9%, respectively. Based on this information, what would be the expected return on well-diversified portfolio A, if A has a..
Common stock valuation : Abercrombie & Fitch's common stock pays a dividend of $0.70. It is currently selling for $34.14. If the firm's investors require a return of 10 percent on their investment from buying Abercrombie & Fitch stock, what growth would Abercrombie & Fitch h..
The efficient market hypothesis holds : Which of the following statements are true if the efficient market hypothesis holds?
Indicative of a flexible short-term financial policy : Which one of the following is most indicative of a flexible short-term financial policy?
Find the present value-annual discount interest rate : Find the present value of $7,000 to be received one year from now assuming a 3 percent annual discount interest rate. Also calculate the present value if the $7,000 is received after two years.

Reviews

Write a Review

Financial Management Questions & Answers

  What was its interest expense

Molteni Motors Inc. recently reported $3.25 million of net income. Its EBIT was $7.75 million, and its tax rate was 35%. What was its interest expense? Round your answer to the nearest dollar. Enter your answer in dollars. For example, an answer of $..

  The demand for pepsi is more elastic than demand for soda

The effect of taxing demanders are the same as taxing suppliers. The demand for Pepsi is more elastic Than the demand for soda.

  What risk-adjusted discount rate will equate NPV of Project

The Unlimited, a national retailing chain, is considering an investment in one of two mutually exclusive projects. The discount rate used for Project A is 12 percent. Further, Project A costs $15,000, and it would be depreciated using MACRS. What ris..

  The current expected capital gains yield on supers stock

Super carpeting Inc just paid a dead-end (Do) of $3.12, and its dividend is expected to grow ata constant rate (g) of 6.5% per year. If super stock is in equilibrium, the current expected capital gains yield on super's stock will be ____?

  Calculate the declining-balance depreciation

Oil Company has purchased production facilities for $2 million and has put them into service. Calculate the declining-balance depreciation (200% declining balance) for a five-year depreciation life.

  Whats the bonds yield to maturity

Analyze the 20-year, 8% coupon rate (annual payment), $1,000 par value bond. The bond currently sells for $1,318. What’s the bond’s yield to maturity?

  Desired real risk-free interest rate

An investor wants to be able to buy 4 percent more goods and services in the future in order to induce her to invest today. During the investment period prices are expected to rise by 2 percent. Which statement(s) below is/are true?

  Total real return on the investment

You bought one of Bergen Manufacturing Co.’s 7.8 percent coupon bonds one year ago for $1,061. These bonds make annual payments and mature twelve years from now. Suppose you decide to sell your bonds today when the required return on the bonds is 4.5..

  What is the effective annual rate on this loan

You have a car loan with a nominal rate of 6.10 percent. With interest charged monthly, what is the effective annual rate (EAR) on this loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit th..

  Firms optimal capital structure calls

Assume that a firm's manager decides to fund its entire investment need this year by issuing $500 million in bonds. After-tax cost of these bonds is 6%. The firm’s optimal capital structure calls for 40% debt and 60% equity. The cost of equity is 16%..

  Some much-needed expansion projects

Seether Co. wants to issue new 11-year bonds for some much-needed expansion projects. The company currently has 8.7 percent coupon bonds on the market that sell for $959.22, make semi-annual payments, and mature in 11 years. The company should set a ..

  Motives for holding cash-issues short-term debt

GT Motors regularly issues short-term debt to finance its daily operations. Suddenly, the credit markets froze and no funds were available for borrowing. Fortunately, the firm had some cash reserves saved that it was able to use to fund its operation..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd