The expected return on equity and volatility of equity

Assignment Help Financial Management

Reference no: EM131010326

A single 5-year zero-coupon debt issue with a maturity value of $120 and the expected return on assets of 12%. Calculate the following:

a. the expected return on equity

b. the volatility of equity

Please answer a AND b and show the calculations

Reference no: EM131010326

Questions Cloud

One-year treasury securities yield : One-year Treasury securities yield 5%. The market anticipates that 1 year from now, 1-year Treasury securities will yield 6%. If the pure expectations theory is correct, what is the yield today for 2-year Treasury securities?

Considered a subjective forecasting method : In the model-testing phase of the nine-step process, which of the following refers to that portion of a sample used to evaluate model-forecast accuracy? Which of the following is not considered a subjective forecasting method?

What is the maturity risk premium for two year security : The real risk-free rate is 3%, and inflation is expected to be 3% for the next 2 years. A 2-year Treasury security yields 6.2%. What is the maturity risk premium for the 2-year security?

What is the default risk premium on the corporate bond : A Treasury bond that matures in 10 years has a yield of 6%. A 10-year corporate bond has a yield of 8%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk premium on the corporate bond?

The expected return on equity and volatility of equity : A single 5-year zero-coupon debt issue with a maturity value of $120 and the expected return on assets of 12%. the expected return on equity, the volatility of equity

Depreciated over five years using the straight-line method : Scott Investors, Inc., is considering the purchase of a $363,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method. The market value of the computer will be $63,000 in ..

Different between risky portfolio and the risk-free asset : A portfolio has an expected rate of return of 14% and a standard deviation of 22%. The risk-free rate is 4%. An investor has the following utility function:. U = E(r)-1/2(A)σ2 Which value of A makes this investor indifferent between the risky portfol..

Experienced the same number of turns as its peer group : Dana reports Inventory of $2,596,867, Cash of $1,228,073, COGS of $8,086,302, and Accounts Receivable of $2,359,372. Its benchmark peer group turns its inventory 7.7 times a year. What would Dana's new inventory level be if it experienced the same nu..

What is sharpe measure of your resulting complete portfolio : You invest $100,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 15% and a standard deviation of 30% and a treasury bill with a rate of return of 2.0%. What is the Sharpe measure of y..

User Account

All Pages