Expected return-standard deviation diagram

Assignment Help Financial Management
Reference no: EM131317847

Assume that you manage a risky portfolio with an expected return of 17% and a standard deviation of 27%. The T-bill rate is 7%. You estimate that a passive portfolio invested to mimic the S&P 500 stock index yields an expected rate of return of 13% with a standard deviation of 25%. In Figure 1, draw the CML and your fund's CAL on an expected return/standard deviation diagram.

Reference no: EM131317847

Questions Cloud

Anticipate college costs : The parents anticipate college costs of $25,000 a year (per child). These costs must be paid at the end of each year. If each child takes four years to complete their college degrees, then how much money must the couple save each year?
What is the project year zero net cash flow : Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.85 million. The fixed asset falls into the three-year MACRS class. The project requires an initial investment in net working capi..
Issue debt and buy back shares of stock : Assume that you manage a firm in an environment with no taxes no costs of financial distress no asymmetric information etc. The firm has no debt in its capital structure. Will the total value of the firm increase if you issue debt and buy back sha..
Expected return-standard deviation diagram : The T-bill rate is 7%. You estimate that a passive portfolio invested to mimic the S&P 500 stock index yields an expected rate of return of 13% with a standard deviation of 25%. In Figure 1, draw the CML and your fund's CAL on an expected return/s..
Form of performance measurement and management : Note: Include a link to this BSC if available.Explain how useful you think the BSC is as a form of performance measurement and management for this particular organisation.
Explain the various digital laws and legislation : Explain, in detail, what you believe to be the greatest challenge facing law enforcement agencies investigating exploitation, cyber stalking, and obscenity. Provide a rationale for your response.Identify the specific challenges that overlapping o..
Apply the concept of time value of money : Why does money have a time value? Can you provide at least one real-life scenario in which you can apply the concept of “time value of money”? Funds set aside to finance the incentive program can be invested at 3%. The CEO has asked you to brief him ..
Determining the monthly mortgage payment : You borrow $200,000 to buy a house. The mortgage interest rate is 4.5 percent and the loan period is 30 years. Payments are mademonthly. What is your monthly mortgage payment?

Reviews

Write a Review

Financial Management Questions & Answers

  Beat the earnings forecasts of wall street stock analysts

Ethics Problem: During the 1990s, General Electric put together a long string of consecutive quarters in which the firm managed to meet or beat the earnings forecasts of Wall Street stock analysts. How do you think GE’s long run of meeting or beating..

  Company has been hit hard due to increase competition

The textbook Production company has been hit hard due to increase competition. The company analysts predict that earnings ( and dividends) will decline ( negative growth) at the rate of 5 percent annually forever. Assume that the require rate of retu..

  Should the old riveting machine be replaced by the new one

Mississippi River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $27,000 to $54,000 per year. The new machine will cost $82,500, and it will have an estim..

  Beginning-of-period retained earnings

A for-profit nursing home has beginning-of-period retained earnings of $40,000. Net income for the period totals $75,000 and dividends declared during the period total $15,000. The balance sheet total for retained earnings will be what amount?

  Determine the present value

Determine the present value of $5,000 is received in the future at the end of each indicated time. In each of the following situations 5% for 10 years 7% for 7 years 9% for 4 years

  The dividend is expected to grow at some constant rate

Gay Manufacturing is expected to pay a dividend of $1.50 per share at the end of the year (D1 = $1.50). The stock sells for $32 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever. W..

  Purchased the stock without margin

In the previous problem, suppose you sell the stock at a price of $62. What is your return? What would your return have been had you purchased the stock without margin? What if the stock price is $46 when you sell the stock?

  Retained earnings using the percent of sales method

Ribbon Industries reported sales of $3 million and net income of $400,000 for 2010. The retained earnings balance at the end of 2012 is $7 million. Ribbon Industries has a dividend payout ratio of 30%. If sales are expected to increase by 25% next ye..

  What is the total monthly sales budget for store

SITXFIN402 Manage Finances within a Budget Projects. You work as a regional manager for a small travel agent, Happy Holidays who operate three stores. What is the total monthly sales budget for Store 1

  What is the market price of one of the firms new bonds

Western Equipment Company will issue 30-year, semiannual bonds with an 8.0% coupon rate and a $1,000 par value. Bonds of similar risk and maturity are currently selling to yield 7.0% in the market place. What is the market price of one of the firm's ..

  What would the new debt ratio

What would the new debt ratio be if the machine were leased? If it is purchased?c. Is the financial risk of the business different under the two acquisition alternatives?

  How should buxton assess the risk

The expected return is 20% with a standard deviation due to currency movements of 5%. However, ten years ago Country Y's currency fell by 40%. How should Buxton assess this risk?

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