What shape would the probability distribution have

Assignment Help Basic Statistics
Reference no: EM131998664

Questio0n: Define the following terms, using graphs or equations to illustrate your answers where feasible.

Risk in general; stand-alone risk; probability distribution and its relation to risk

Expected rate of return, ˆrr^

Continuous probability distribution

Standard deviation, σ; variance, σ2σ2

Risk aversion; realized rate of return, ¯rr¯

Risk premium for Stock i, RPiRPi;

market risk premium, RPMRPM

Capital Asset Pricing Model (CAPM)

Expected return on a portfolio, ˆrpr^p; market portfolio

Correlation as a concept; correlation coefficient, ρ

Market risk; diversifiable risk; relevant risk

Beta coefficient, b; average stock's beta

Security Market Line (SML); SML equation

Slope of SML and its relationship to risk aversion

Equilibrium; Efficient Markets Hypothesis (EMH); three forms of EMH

Fama-French three-factor model

Behavioral finance; herding; anchoring

1) The probability distribution of a less risky return is more peaked than that of a riskier return. What shape would the probability distribution have for (a) completely certain returns and (b) completely uncertain returns?

2) Required Rate of Return Suppose rRF = 5%rRF = 5%, rM = 10%rM = 10%, and rA = 12%rA = 12%. Calculate Stock A's beta. If Stock A's beta were 2.0,
then what would be A's new required rate of return?

3) Portfolio Required Return Suppose you manage a $4 million fund that consists of four stocks with the following investments: If the market's required rate of return is 14% and the risk-free rate is 6%, what is the fund's required rate of return?

          Stock

Investement

beta

A

400000

1.50

B

600000

-0.50

C

1000000

1.25

D

2000000

0.75

How can the WACC be both an average cost and a marginal cost?

4) After-Tax Cost of Debt LL Incorporated's currently outstanding 11% coupon bonds have a yield to maturity of 8%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is LL's after-tax cost of debt?

5) Cost of Preferred Stock with Flotation Costs Burnwood Tech plans to issue some $60 par preferred stock with a 6% dividend. A similar stock is selling on the market for $70. Burnwood must pay flotation costs of 5% of the issue price. What is the cost of the preferred stock?

6) Cost of Equity: Dividend Growth Summerdahl Resort's common stock is currently trading at $36 a share. The stock is expected to pay a dividend of $3.00 a share at the end of the year (D1 = $3.00)(D1 = $3.00), and the dividend is expected to grow at a constant rate of 5% a year. What is its cost of common equity?

7) Cost of Equity: CAPM Booher Book Stores has a beta of 0.8. The yield on a 3-month T-bill is 4%, and the yield on a 10-year T-bond is 6%. The market risk premium is 5.5%, and the return on an average stock in the market last year was 15%. What is the estimated cost of common equity using the CAPM?

8) WACC Shi Import-Export's balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shi's tax rate is 40%, rd = 6%rd = 6%, rps = 5.8%rps = 5.8%, and rs = 12%rs = 12%. If Shi has a target capital structure of 30% debt, 5% preferred stock, and 65% common stock, what is its WACC?

Reference no: EM131998664

Questions Cloud

Identify and discuss the basic roles of hrm professional : Research, identify, and discuss the basic roles of HRM professionals, as well as explain how their roles have changed over the year.
Present value of obtaining a master degree : If she does not go to school, she will earn $70,000 a year for the first two periods and $500,000 for the third period. Jill's discount rate is11%.
Evaluate the effectiveness of leadership : For the corporation that does not operate internationally, propose one business-level strategy and one corporate-level strategy.
Recommend to reduce the us debt : What types of economic policy would you recommend to reduce the U.S. debt? Why?
What shape would the probability distribution have : The probability distribution of a less risky return is more peaked than that of a riskier return. What shape would the probability distribution.
Review the articles on team dynamics : Review at least 7-8 academically reviewed articles on Team Dynamics. Develop power presentation based on the articles.
Slow economic growth and high unemployment : According to the Stagnation school of Marxist economics the slow economic growth and high unemployment we see today is typical of modern corporate capitalism
Progressive tax policy that calls for higher taxes : A progressive tax policy that calls for higher taxes each year. (d) it had to balance out the Federal tax cuts and increased spending.
Describe the communication methods : One of your employees is constantly late, leaving food and drinks at the work station, and you are forced to address the situation.

Reviews

Write a Review

Basic Statistics Questions & Answers

  Statistics-probability assignment

MATH1550H: Assignment:  Question:  A word is selected at random from the following poem of Persian poet and mathematician Omar Khayyam (1048-1131), translated by English poet Edward Fitzgerald (1808-1883). Find the expected value of the length of th..

  What is the least number

MATH1550H: Assignment:  Question:     what is the least number of applicants that should be interviewed so as to have at least 50% chance of finding one such secretary?

  Determine the value of k

MATH1550H: Assignment:  Question:     Experience shows that X, the number of customers entering a post office during any period of time t, is a random variable the probability mass function of which is of the form

  What is the probability

MATH1550H: Assignment:Questions: (Genetics) What is the probability that at most two of the offspring are aa?

  Binomial distributions

MATH1550H: Assignment:  Questions:  Let’s assume the department of Mathematics of Trent University has 11 faculty members. For i = 0; 1; 2; 3; find pi, the probability that i of them were born on Canada Day using the binomial distributions.

  Caselet on mcdonald’s vs. burger king - waiting time

Caselet on McDonald’s vs. Burger King - Waiting time

  Generate descriptive statistics

Generate descriptive statistics. Create a stem-and-leaf plot of the data and box plot of the data.

  Sampling variability and standard error

Problems on Sampling Variability and Standard Error and Confidence Intervals

  Estimate the population mean

Estimate the population mean

  Conduct a marketing experiment

Conduct a marketing experiment in which students are to taste one of two different brands of soft drink

  Find out the probability

Find out the probability

  Linear programming models

LINEAR PROGRAMMING MODELS

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