Preferred by a rational investor

Assignment Help Financial Management
Reference no: EM13809165

For the following investments, state which would always be preferred by a rational investor (assuming that these are the only investments available to the investor):

Portfolio A      r = 7.5%   σ = 20%

Portfolio B      r = 7.5%   σ = 30%

Reference no: EM13809165

Questions Cloud

What is the average accounts payable for APP : A chain of appliance stores, APP Corporation, purchases inventory with a net price of $750,000 each day. The company purchases the inventory under the credit terms of 1/15, net 35. APP always takes the discount, but takes the full 15 days to pay its ..
What is the retailers effective cost of trade credit : A large retailer obtains merchandise under the credit terms of 1/20, net 45, but routinely takes 60 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's e..
What is the companys average accounts receivable : Medwig Corporation has a DSO of 42 days. The company averages $4,500 in credit sales each day. What is the company's average accounts receivable? Round your answer to the nearest dollar.
Financed by risk-free debt : A company is 35% financed by risk-free debt. The interest rate is 12%, the expected market risk premium is 9%, and the beta of the company's common stock is 1.5. What is the company cost of capital? What is the after-tax WACC, assuming that the compa..
Preferred by a rational investor : For the following investments, state which would always be preferred by a rational investor (assuming that these are the only investments available to the investor):
What was the real return on the stock market : What was the real return on the stock market? What was the risk premium?
A widget manufacturer currently produces : A widget manufacturer currently produces 300,000 units a year. It buys widget lids from an outside supplier at a price of $4 a lid. The plant manager believes that it would be cheaper to make these lids rather than buy them. Direct production costs a..
Earnings and dividends per share-what is current stock price : ACME Inc’s earnings and dividends per share are expected to grow indefinitely by 5% a year. If next year's dividend is $10 and the market capitalization rate is 8%, what is the current stock price? ACME Inc’s growth will stop after year 3. In year 4 ..

Reviews

Write a Review

Financial Management Questions & Answers

  Annual interest rate and how much needs to be borrowed

Company expects to use $1,600,000 short term credit bus wants a $3, 000, 00 line of credit in case of unexpected events. LIBOR is 4% and the loan is priced at LIBOR plus 2.5% with Commitment fee of 0.3% on the unused portion of the line. Bank also re..

  Estimate value of asset expected to provide cash inflows

Laura Drake wishes to estimate the value of an asset expected to provide cash inflows of $3000 per year at the end of years 1 through 4 and $15000 at the end of year 5. Her research indicates that she must earn 10% on low risk assets, 15% on average ..

  What is the amount of the operating cash flow

Paul's Boats has sales of $680,000 and a Net Profit Margin of 5.2 percent. The annual depreciation expense is $74,000. The tax rate is 34 percent. What is the amount of the operating cash flow if the company has no long-term debt?

  Equity cost of capital and expected growth rate

You expect KT industries (KTI) will have earnings per share of $3 this year and expect that they will pay out $1.50 of these earnings to shareholders in the form of a dividend. KTI's return 2 on new investments is 15% and their equity cost of capital..

  Issued zero-coupon bonds with a par value

Fantastic Floors Inc. just issued zero-coupon bonds with a par value of $1,000. The bond has a maturity of 15 years and a yield to maturity of 7.45%, compounded semi-annually. What is the current price of the bond? Round the answer to two decimal pla..

  What are the costs and benefits

Are there any good reasons to have Federal Reserve banks scattered around the country rather than having everything run by the Board of Governors in Washington, D.C.? What are the costs and benefits?

  Present the pros and cons or benefit analysis

Develop 3 proposals for your development strategy, which include outsourcing (buy), insourcing (make), or a combination of both. Present the pros and cons or benefit analysis for each of the 3 proposals

  Prepare income statement and retained earnings statement

These financial statement items are for below Corporation at year-end, Instructions (a) prepare an adjusted trial balance. Then use adjusted tiral to prepare income statement and a retained earnings statement for the year. Above Corporation did not i..

  Discuss various strategies to put in place that would reduce

Discuss various strategies to put in place that would reduce disbursement costs and you are the financial manager for a mid-sized company with 10 locations throughout the United States.

  According to expectation hypothesis of the yield curve

Assume that interest rate on one-year bond is 2%. You can observe that the interest rate on 2-year bond is 2.6%. Assume there is no liquidity premium and the interest rates are determined according to expectation hypothesis of the yield curve.

  Cultural dimensions-human resource management

Describe the five cultural dimensions identified by Geert Hofstede as they apply to human resource management.

  Half-year convention deprecation

KOOKIS, Inc., has developed a new cooky. The firm is planning to spend $60,000 on a new oven to produce the new cooky for 3 years. The machine has an expected life of three years, a $10,000 estimated resale value, and falls under the straight-line 3-..

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