Weighted average of standard deviations of individual assets

Assignment Help Financial Management
Reference no: EM13847475

Please mark the following as either True or False

1. To decrease the variance of a portfolio of assets, simply add assets with low/small variance.

2. An investor who is in the 33% tax bracket is indifferent between a 9% tax-free muni and a 6% taxable bond.

3. The standard deviation of a portfolio of assets is simply the weighted average of the standard deviations of the individual assets.

Reference no: EM13847475

Questions Cloud

Average arithmetic returns overstate the return on portfolio : If an asset’s returns come from a normal distribution, then the relation between its arithmetic and geometric averages are: E[arithmetic average] = E[geometric average] – 0.5σ2. Relative to a buy and hold strategy, average arithmetic returns overstat..
Money market securities are not free of default risk : Except for Treasury bills, money market securities are not free of default risk. Standard & Poor’s 500 is a broadly based index of 500 firms and it is a price-weighted index.
An economic indicator is data : An economic indicator is data, usually of macroeconomic scale, used by investors to interpret current or future investment possibilities and to judge the overall health of an economy. Identify and define five economic indicators.
Formula of approximations of real return-rate of inflation : The formula of the approximations of the real return becomes less accurate as the rate of inflation increases. When deciding between a risky asset (or portfolio) and a risk-free asset, the more risk averse the investor, the greater the proportion the..
Weighted average of standard deviations of individual assets : An investor who is in the 33% tax bracket is indifferent between a 9% tax-free muni and a 6% taxable bond. The standard deviation of a portfolio of assets is simply the weighted average of the standard deviations of the individual assets.
What is the price and expected return relation : For a given set of possible cash flows, as the required risk premium for a project increases, its price must decrease to entice investors to purchase the asset. (Hint: What is the price and expected return (premium) relation?) Eurodollars are dollar-..
What is the incremental operating profit : Bangers, Inc. is a start-up manufacturer of Australian-style frozen veggie pies located in San Antonio, Texas. The company is five years old and recently installed the manufacturing capacity to quadruple its unit sales. what is the incremental operat..
Decrease the variance of a portfolio of assets : To decrease the variance of a portfolio of assets, simply add assets with low/small variance. An investor who is in the 33% tax bracket is indifferent between a 9% tax-free muni and a 6% taxable bond. The standard deviation of a portfolio of assets i..
What is your expected annualized yield on this loan : Assume you are a mortgage lender. You have offered a borrower a mortgage loan for $600,000 with a somewhat unusual structure. What is your expected annualized yield on this loan if you believe the borrower will prepay the loan at the end of the year ..

Reviews

Write a Review

Financial Management Questions & Answers

  Compounded annually

If you invest $10,000 at 10% interest (compounded annually), how much will you have in 10 years? Round your answer to the nearest dollar.

  What is the company''s eva and what does the eva represent

Smith's Shoe Shop had $4,000,000 in operating income last year, after-tax cost of capital of 7%, and a tax rate of 35%. The company has $14,000,000 in stockholder's equity, $17,000,000 in long-term bonds, and $1,500,000 in preferred stock.

  Change in accounting estimate

Change in accounting estimate

  State highway department is planning the construction

A state highway department is planning the construction of a toll road. Construction cost will be $200M (at period=year 0). Annual maintenance is estimated to be $1M every year and forever. In addition, every 10 years in perpetuity (=forever), a majo..

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

  Exchange rate agreements and the currency swap

IBM is thinking about issuing a bond in Europe and swapping the annual payments back to US dollars. If fixed rates are 7% in Europe and 9% in the US and the current exchange rate is 1.40 Dollars to every Euro then:

  Assume simple interest between bond coupon dates

A $1000 bond with semi-annual coupons, with coupon rate of 6% per annum convertible semi-annually, matures at par on October 15th, 2020. The bond is purchased on June 28th, 2005 to yield the investor a nominal rate of 7% per annum convertible semi-an..

  How do you determine if the company has too much liquidity

Defines how solvency and liquidity differ and provides an example of two companies. As a financial manager, what can you do to make sure your company stays solvent and is not too liquid?

  Stock contributes to a well-diversified portfolio

According to the Capital Asset Pricing Model, what measures the amount of risk that an individual stock contributes to a well-diversified portfolio? Define this measurement.

  How much would you still owe at the end of the first year

Suppose you borrowed $20,000 at a rate of 8.5% and must repay it in 5 equal instalments at the end of each of the next 5 years. How much would you still owe at the end of the first year, after you have made the first payment?

  The cost of debt is lower than the costs of stocks

The cost of debt is lower than the costs of stocks. Cost of Preferred stock is higher than the cost of common stocks.

  Discuss the operation of monetary policy in the us

Define monetary policy, and discuss the operation of monetary policy in the United States post-GFC.

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