What is the expected return of a portfolio

Assignment Help Finance Basics
Reference no: EM13537355

Hershey - equity beta-0.28, Starbucks - equity beta-1.20 Autodesk- equity beta-2.14
Suppose the market risk premium is 5% and the risk-free interest rate is 4%. Using the data above calculate the expected return of investing in
a. Starbucks' stock.
b. Hershey's stock.
c. Autodesk's stock.

Suppose Autodesk stock has a beta of 2.16, whereas Costco stock has a beta of 0.69. If the risk-free interest rate is 4% and the expected return of the market portfolio is 10%, what is the expected return of a portfolio that consists of 60% Autodesk stock and 40% Costco stock, according to the CAPM?

Consider the following two, completely separate, economies. The expected return and volatility of all stocks in both economies is the same. In the first economy, all stocks move together-in good times all prices rise together and in bad times they all fall together. In the second economy, stock returns are independent-one stock increasing in price has no effect on the prices of other stocks. Assuming you are risk-averse and you could choose one of the two economies in which to invest, which one would you choose? Explain.

Reference no: EM13537355

Questions Cloud

What is the expected return of investing in company b : Company A has a beta of 2.77. Company B has a beta of .73. Company C has a beta of .90. The risk free rate is 6% and the market risk premium is 4%. What is the expected return of investing in Company B?
What is the systems total energy at this time : Consider a 0.20-kg ball interacting gravitationally with the earth. What is the system's total energy at this time
Subtract the loan payment from the lease payment : Subtract the loan payment from the lease payment.
What is the net work done on the piano : a 330 kg piano is pushed 3.6 m up a 28 degree incline by three men starting at rest at the bottom of the hill and ending at 41 cm/s. What is the net work done on the piano
What is the expected return of a portfolio : What is the expected return of a portfolio that consists of 60% Autodesk stock
Calculate the objects weight at this height : A 100 object is taken to a height of 250 above the Earth's surface. What is the object's mass at this height? What is the object's weight at this height
Aspirin could be converted completely into thermal energy : Suppose one gallon of gasoline produces 1.1 multiplied by 108 J of energy, and this energy is sufficient to operate a particular car for 34 miles. An aspirin tablet has a mass of 270 mg. If the aspirin could be converted completely into thermal energ..
Measures the length of this trip to be light-years : A space traveler moving at a speed of 0.56c with respect to the earth makes a trip to a distant star that is stationary relative to the earth. He measures the length of this trip to be 7.5 light-years. What would be the length of this same trip (in l..
Submit an annotation of the article : Submit an annotation of the article

Reviews

Write a Review

Finance Basics Questions & Answers

  What would be the cost of equity from new stock

Javits & Son's common stock currently trades at $30.00 a share. It is expected to pay an annual dividend of $3.00 a share at the end of the year (D1=$3.00), and the constant growth rate is 5% a year.

  An investor recently purchased a corporate bond which

an investor recently purchased a corporate bond which yields 9 percent. the investor is in the 36 percent tax bracket.

  At what price would the bonds sell

Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 8%. At what price would the bonds sell? Round the answer to the nearest cent.

  Calculate the simple interest on investment

Calculate the simple interest on a $9,212 investment made for five years at an interest rate of 6.5 percent per year.

  The genesis and sensible essentials teams believe that the

both the genesis and sensible essentials teams believe that the client engagement was very successful. all the critical

  Estimate the internal rate of return for the machine

A machine can be purchased for $10,500, including transportation charges, but installation costs will require $1,500 more. The machine is expected to last four years and produce annual cash revenues of $6,000.

  Lets take a moment to discuss your thoughts on managers vs

lets take a moment to discuss your thoughts on managers vs leaders. do you agree with dr chands philosophy? what

  Which of the following bonds has the most interest rate risk

Explain briefly the difference between interest rate ( or price) risk and reinvestment rate risk. Which of the following bonds has the most interest rate risk ?

  Capital structure and stock split

Suppose you own 2000 common shares of Laurence Incorporated. The EPS is $10.00, the DPS is $3.00, and the stock sells for $80 per share. Laurence announces a 2-for-1 stock split. what will the adjusted EPS and DPS be, and what would you expect the ..

  What was your dividend yield

One year ago, you purchased a stock at a price of $47.50 a share. Today, you sold the stock and realized a total loss of 22.11 percent. Your capital gain was -$12.70 a share. What was your dividend yield? Answer A. 4.63% B. 4.88% C. 5.02% D. 12.67..

  What your marginal federal tax rate

What your marginal federal tax rate? (What percent of your next dollar earned is lost via taxes?)

  What are the expected returns for stocks x and

what are the expected returns for stocks x and y?nbspstock xstock y 185

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