User Account

All Pages

On the announcement your overall wealth

Assignment Help Financial Management
Reference no: EM131448316

A big pharmaceutical? company, DRIg, has just announced a potential cure for cancer. The stock price increased from $2 to $82 in one day. A friend calls to tell you that he owns DRIg. You proudly reply that you? do, too. Since you have been friends for some? time, you know that he holds the? market, as do? you, and so you both are invested in this stock. Both of you care only about expected return and volatility. The? risk-free rate is 3%?, quoted as an APR based on a? 365-day year. DRIg made up 1.99% of the market portfolio before the news announcement.

a. On the announcement your overall wealth went up by 1.4% ?(assume all other price changes cancelled out so that without? DRIg, the market return would have been? zero). How is your wealth? invested?

b. Your? friend's wealth went up by 1.9%. How is his wealth? invested?

a. On the announcement your overall wealth went up by 1.4% ?(assume all other price changes cancelled out so that without? DRIg, the market return would have been? zero). How is your wealth? invested? ?(Round all intermediate values to five decimal places as? needed.)

The percentage of your wealth invested in the market is_________?%

b. Your? friend's wealth went up by 1.9 %. How is his wealth? invested? ?(Round all intermediate values to five decimal places as? needed.)

The percentage of his wealth invested in the market is ______?%.

Reference no: EM131448316

Questions Cloud

The current spot exchange rate and forward exchange rate : Suppose that the current spot exchange rate is €0.80/$ and the three-month forward exchange rate is €0.7813/$. The three-month interest rate is 5.6 percent per annum in the United States and 5.40 percent per annum in France. Show how to realize a cer..
The time value of money might be relevant : What is meant by when someone talked about the time value of money with his/her managers? Can you think of an example in your own work history or something you've read about where the time value of money might be relevant?
Interest will be assessed on outstanding overdue balance : According to SFU’s Fees and Tuition policy, outstanding fees must be paid by the due date of each term. A late fee interest will be assessed on the outstanding overdue balance on your account. The rate is 2% per month (nominal rate) or 18% per annum ..
What is the price of the companys stock : Starting in year 6 the company's dividend is going to grow at 6% until year 10, and then will grow at 2% forever. Suppose the company has a beta of 1.2, the risk-free rate is 2%, and the market risk premium is 6%. What is the price of the company's s..
On the announcement your overall wealth : A big pharmaceutical? company, DRIg, has just announced a potential cure for cancer. The stock price increased from $2 to $82 in one day. A friend calls to tell you that he owns DRIg. You proudly reply that you? do, too. On the announcement your over..
How the value of the japanese yen may change in near future : Since Nike has international business in numerous countries, it closely monitors exchange rate movements. In particular, Nike has major business in Japan and in the United Kingdom. It has even begun to sell its shoes in Eastern European countries. Wh..
What is the present value cost of owning the equipment : Lewis Securities Inc. has decided to acquire a new market data and quotation system for its Richmond home office. The system receives current market prices and other information from several online data services and then either displays the informati..
Prepare loan amortization schedule : ICS plans on expanding their plant and will fund $2,000,000. Part of the funding will come from cash, but the balance of $775,000 will be financed. The interest rate will be 5% and ICS plans on borrowing the funds for 4 years. Prepare a loan amortiza..
What arbitrage opportunity does this create : 3-month LIBOR rates for Euro and USD are 4.75% and 5.70%, respectively, with continuous compounding. The current exchange rate between Euro and USD is 1.41 USD/EUR. The 3-month forward price for Euro quoted by a bank is 1.40 USD/EUR. What arbitrage o..

Reviews

Write a Review

Financial Management Questions & Answers

  What is the cost of goods sold for the firm

Bryan Corporation has current liabilities of $340,000, a quick ratio of 1.8, inventory turnover ratio of 4.2, and a current ratio of 3.3. What is the cost of goods sold for the firm?

  What is the value of the annuity today

A 7-year annuity of 14 $8,600 semiannual payments will begin 9.5 years from now, with the first payment coming 10 years from now. If the discount rate is 10 percent compounded semiannually, what is the value of this annuity seven years and five years..

  What was the dealer gain or loss on the change in rates

Crown Honda purchased one of its most popular motorcycle models for 965,000 yen. The FX rate for the yen was 142 yen per dollar at the time of purchase, but then rose to 171.8 yen by the time payment was made. What was the dealer’s gain or loss on th..

  What is the payback period for project

McKenna Sports Authority is getting ready to produce a new line of gold clubs by investing $1.85 million. The investment will result in additional cash flows of $525,000, $837,500, and $1,200,000 over the next three years. What is the payback period ..

  Addition to retained earnings and dividend yield

Polycom Systems earned $574 million last year and paid out 24 percent of earnings in dividends. By how much did the company’s retained earnings increase? With 100 million shares outstanding and a stock price of $117, what was the dividend yield?

  The standard deviation of the market portfolio

You are considering an investment in Tar Heel Championship, LLC. You know the risk free rate is 2.0%, the expected return on the market portfolio is 9.2%, and the standard deviation of the market portfolio is 22.09%. You also know that Tar Heel Champ..

  Cumulative abnormal returns

Cumulative Abnormal Returns: The following figures present the results of four cumulative abnormal returns (CAR) studies. Indicate whether the results of each study support, reject, or are inconclusive about the semistrong form of the efficient marke..

  What is supply net income

Dharma Supply has earnings before interest and taxes (EBIT) of $563,000, interest expenses of $259,000, and faces a corporate tax rate of 34 percent. What is Dharma Supply's net income? If it didn't have any debt, Dharma's net income is?

  What is fin world cost of preferred stock

Fin world has just offered preferred stock that pays $3.50 per share and was sold for $44. Fin world had to pay $2.15 paper share in floatation costs. What is fin world's cost of preferred stock?

  Calculate the average amount of time customer waits in line

A grocery store estimates that customers arrive at the rate of 15 per hour. The cashier can serve customers at a rate 20 per hour. Calculate the average amount of time customer waits in a line (in minutes)

  Considering the acquisition of unit

Dynasty Co. is considering the acquisition of a unit from the French government. Its initial outlay would be $5 million. It will reinvest all the earnings in the unit. It expects that at the end of 8 years, it will sell the unit for 12,300,000 euros ..

  Adding robotic paint sprayer to its production line

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer’s base price is $1,080,000, and it would cost another $22,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold af..

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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