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(a)The expected return on a given efficient portfolio is 25% and its standard deviation is 4%. Suppose that the risk-free rate is 5% and the expected return on the market portfolio of risky assets is 20%. In this environment, what expected rate of return would a security earn if it had a 0.5 correlation with the market and a standard deviation of 2%? (b) What is the beta of an efficient portfolio with rp = 20% if rf = 5%, rm = 15%, and σm = 20%? What is its standard deviation? What is its correlation with the market?
If I purchase a policy that pays a fixed benefit of 90% of my current salary, how long will it be before this amount covers only 70% of my future salary if I assume salary increases of 4% per year?
Compare the assumptions underlying Arbitrage Pricing Theory with those underlying the mean-variance Capital Asset Pricing Model
Gork Musical Instruments produces several products, one of which is facing increasing competition from cheaper, plastic alternatives. It expects that in coming years the number of units sold will fall by 10% pa. However, because of the competition fr..
If you promise to go to school then your even richer Uncle Vinny will buy you a Ferrari provided his business can afford it. - The risk-free rate is 6%. What is your uncle's deal worth to you?
We know that the cost of capital is in part based upon risk. The riskier the investment, the higher the cost of the capital. Entrepreneurs are often flabbergasted at the return investors expect. Most entrepreneurs see their businesses as "low risk" o..
In the first year of operation, the mine produced one-fourth of its reserve. - Calculate the total depletion and first-year depletion deduction given that the land can be salvaged for $10,000.
Good business and accounting practices require the exercise of good judgment. How should ethics be incorporated into making accounting judgments? Why is ethics important?
A firm enjoys net sales of $3,500,000. Cost of goods sold is $2,000,000, depreciation expense is $100,000, and other management and administrative expenses at $350,000. It records interest expense at $200,000 and is taxed at the marginal tax rate of ..
Using the following assumptions, develop a budget in pesos and dollars for this project:
For a 4 person surgical group, what kind of formula may be devised to fairly and consistently measure and reward productivity? What changes may be needed if one surgeon decides to perform more office work and less surgery?
In most cases accountants and finance directors do not work in isolation from other parts of the company. Discuss to what extent an understanding of the literature on management therioes might enhance their performance.
Summerdahl Resorts' common stock is currently trading at $30.00 per share. The stock is expected to pay a dividend of $1.75 a share at the end of the year (D1 = $1.75), and the dividend is expected to grow at a constant rate of 5% a year. What is the..
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