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Bill Dukes has $100,000 invested in a 2-stock portfolio. $35,000 is invested in Stock X and the remainder is invested in Stock Y. X's beta is 1.50 and Y’s beta is 0.70. What is the portfolio's beta?
Assume that the risk-free rate is 6.5% and that the market risk premium is 4%. What is the required rate of return on a stock with a beta of 0.9? What is the required rate of return on a stock with a beta of 0.8? What is the required return on the ma..
You bought one of Great White Shark Repellant Co.’s 6.2 percent coupon bonds one year ago for $1,038. These bonds make annual payments and mature 15 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is..
Harley Motors has $25 million in assets, which were financed with $10 million of debt and $15 million of equity. Harley's tax rate is 40%. If Harley's unlevered beta is 0.8, what is Harley's current (levered) beta? Show your work.
An investor enters into a short forward contract on 100 million yen. The forward exchange rate for US$ 1 is set at US$0.012 per yen. How much does the investor lose or gain if the exchange rate at the end of the contract is (i) US$0.011 per yen, and ..
Company A has a beta of 0.70, while Company B's beta is 0.85. The required return on the stock market is 11.00%, and the risk-free rate is 2.25%. What is the difference between A's and B's required rates of return?
SML Suppose you observe the following situation: Return if State Occurs State of Probability of Economy State Stock A Stock B Bust .15 − .10 − .08 Normal .60 .09 .08 Boom .25 .32 .26 a. Calculate the expected return on each stock. (Do not round inter..
Project Evaluation Your firm is contemplating the purchase of a new $670,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $50,000 at the end of that time.
Do project financial results affect financial health of the entire organization? Can you think of an example where the reverse holds true as well -- in other words, an example where the financial health of an organization affected project outcomes?
Genetic Insights Co. purchases an asset for $16,628. This asset qualifies as a seven-year recovery asset under MACRS. The seven-year fixed depreciation percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, r..
Consider a 100,000,000 CMBS pass-through (PT) security consisting of fresh 15 year fixed rate loans that fully amortize over a period of 30 years, and have a WAC of 7% with fees amounting to 0.5%. Why is there generally a large fraction of outstandin..
Year to date, Company Y had earned a 7 percent return. During the same time period, Company R earned 9.25 percent and Company C earned -2.25 percent. If you have a portfolio made up of 35 percent Y, 40 percent R, and 25 percent C, what is your portfo..
Should the major decisions on resource depletion (especially energy policy) be made: By government experts? By scientific experts? By everyone? Provide and develop moral arguments in support of your judgment.
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