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Suppose that you can invest in three assets: 1) risk-free Treasury bill with return of 5%; 2) A stock portfolio with expected return of 15% and standard deviation of 50%; 3) A fixed income portfolio with expected return of 10% and standard deviation of 20%. Assume that historically the correlation of the stock portfolio and fixed income portfolio is -0.2.
Suppose that you have $9,000 to invest and you want to invest 2/9 (22.22%) of your money in the risky portfolio o, how would you allocate your $9,000 among the three assets?
What’s the Sharpe ratio of your risky portfolio o? Is it higher than the Sharpe ratio of the fixed income portfolio or the stock portfolio?
The state of Alabama has legally earmarked around 85 percent of its state budget.
Discuss whether the multi-national corporation (MNC) will risk be over-hedged its position to the extent affect the company's financial position.
Toy Corp. is attempting to estimate its optimal capital structure. Currently, the company's cost of equity, which is based on the CAPM, is 12.0% and the risk free rate and equity market risk premium are 4.0% and 6.0%, respectively.
What is the probability that he can obtain a grant to start an Italian ice cream shop?
Assume that you are on the financial staff of Vanderheiden Inc., and you have collected the following data: The yield on the company's outstanding bonds is 7.75%, its tax rate is 40%, the next expected dividend is $0.65 a share, What is the firm's WA..
The common stock of ABC Homes has an expected return of 13.6% and a beta of 0.7. The expected return on the market portfolio is 16%. What is the risk-free rate?
what is the company’s WACC?
Merafe Mining is evaluating the possibility of adding a new product line to its product mix. Calculate the after-tax salvage cash flow.
Ethier Enterprise has an unlevered beta of 1.05. Ethier is financed with 45% debt and has a levered beta of 1.45. If the risk free rate is 4.5% and the market risk premium is 7%, how much is the additional premium that Ethier's shareholders require t..
Plaza North sells a variety of merchandise to retail stores on open account, but insists that any customer who fails to pay an invoice when due must replace it with an interest-bearing note. The company adjusts and closes it accounts at December 31. ..
Prove that a covered put strategy has equivalent payoffs to a short call and a borrowed zero-coupon bond with a Par = X.
He plans to open a retirement account and make monthly contributions from his paycheck.
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