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Suppose that the index model for stocks A and B is estimated from excess returns with the following results:
RA = 3.6% + 1.20RM + eA RB = –1.6% + 1.5RM + eB σM = 16%; R-squareA = 0.25; R-squareB = 0.15 Assume you create portfolio P with investment proportions of 0.70 in A and 0.30 in B.
What is the standard deviation of What is the firm-specific variance of your portfolio? (Do not round your intermediate calculations. Round your answer to 4 decimal places.)
Millbridge Hospital buys its supplies in bulk and has recently switched vendors. The first purchase Millbridge made was for 500 boxes of gauze at $3.46 a box. The purchase had payment terms of 2/15 N/30. Millbridge earns four percent on its idle cash..
An oil drilling company has some free cash flow that is not expected to be used for growth or investment projects. Which method of cash distribution carries more informational content when an announcement is made? Some researchers and analysts have n..
The real risk-free rate is 3.15%. Inflation is expected to be 2.6% this year, 4.65% next year, and then 2.15% thereafter. The maturity risk premium is estimated to be 0.05(t - 1)%, where t = number of years to maturity. What is the yield on a 7-year ..
Apocalyptica Corporation is expected to pay the following dividends over the next four years: $6.80, $17.80, $22.80, and $4.60. Afterwards, the company pledges to maintain a constant 5.75 percent growth rate in dividends, forever. If the required ret..
Humphrey’s Housing has been practicing cash management for some time by using the Baumol model for determining cash balances. Some time ago, the model called for an average balance (C*/2) of $500; at that time, the rate on marketable securities was 4..
Riverhawk Corporation has a bond outstanding with a market price of $1,250.00. The bond has 10 years to maturity, pays interest semiannually, and has a yield to maturity of 9%. What is the bond’s coupon rate?
You find a certain stock that had returns of 13.4 percent, –21.7 percent, 27.7 percent, and 18.7 percent for four of the last five years. Assume the average return of the stock over this period was 11.40 percent. What was the stock’s return for the m..
Salmon Inc. has debt with both a face and a market value of $3,000. This debt has a coupon rate of 7% and pays interest annually. The expected earnings before interest and taxes is $1,200, the tax rate is 34%, and the unlevered cost of capital is 12%..
O’Connell & Co. expects its EBIT to be $83,000 every year forever. The firm can borrow at 11 percent. O’Connell currently has no debt, and its cost of equity is 15 percent and the tax rate is 35 percent. The company borrows $144,000 and uses the proc..
Frank's Fruitcakes is looking to purchase a web server system for e-business. Alternative 1 is to purchase an off-brand system, with equipment costing $50,000. Training, installation, and operating costs are shown in the expense column of the table b..
If you assume that the interest rate is 10% (which means that after you get the money, it will be invested and you will get 10% interest from it), how much money will you have in 4 years.
Spontaneous sources of funds refer to all of the below EXCEPT:
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