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Stock A has an expected return of 10% and a standard deviation of 10%. Stock B has an expected return of 15% and a standard deviation of 20%. The two stocks are perfectly negatively correlated (1,2 = -1). What set of weights yields a portfolio with a zero variance? a. 2/3 in Stock A; 1/3 in Stock B b. 2/3 in Stock B; 1/3 in Stock A c. 2 in Stock A; -1 in Stock B d. 2 in Stock B; -1 in Stock A e. None of these. *I'm pretty sure it is either A or B, but I am not completely certain. Can someone clarify which it is and why?
You are given the following information concerning Parrot head Enterprises: Debt: 9,700 7.2 percent coupon bonds outstanding, with 23 years to maturity and a quoted price of 105.75. These bonds pay interest semiannually. Preferred stock: 8,700 shares..
Snyder Computer Chips, Inc. is experiencing a period of rapid growth. Calculate the value of the stock today.
Assume the risk-free rate is 1%. 1 month later, the put option is trading at $0.85. so you decide to sell your put option. What is your profit or loss?
McKenna Sports Authority is getting ready to produce a new line of gold clubs by investing $1.85 million. What is the payback period for this project?
The HTR Bank is planning on raising $750 million in a new offering of commercial paper through its holding company. It plans on using $725 million of it to fund new loans. The current interest rate for similar commercial paper is 7.15% and it expects..
David Ortiz Motors has a target capital structure of 45% debt and 55% equity. The yield to maturity on the company's outstanding bonds is 12%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 8.55%. What is the comp..
In the following, assume that the CAPM is true. Denote by rM the return of the market portfolio, βi the beta of security i with the market portfolio, and ρi,M the correlation between security i and the market portfolio M. Find the risk-free rate rf o..
Bill signed a $8,000 discount note at the bank which charged him a 6.5% discount rate. The loan is for 300 days. Please show all work. Find the proceeds: Find the effective rate:
The bonds make semiannual payments. What must the coupon rate be on the bonds?
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.79 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be w..
Portfolio Beta You own $1,300 of City Steel stock that has a beta of 1.56. You also own $5,600 of Rent-N-Co (beta = 1.86) and $4,600 of Lincoln Corporation (beta = .96). What is the beta of your portfolio (closest to)?
First City Bank pays 7 percent simple interest on its savings account balances, whereas Second City Bank pays 7 percent interest compounded annually. If you made a $73,000 deposit in each bank, how much more money would you earn from your Second City..
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