Question

Answer the following questions. Assume a two-stock portfolio XY is created with $6000 invested in security...

Answer the following questions. Assume a two-stock portfolio XY is created with $6000 invested in security X and $9000 in security Y. The expected return and the variance for Portfolio XY is 23.32% and 0.45%, respectively. What is the coefficient of variation for Portfolio XY?

Select one:

a. 0.67

b. 0.24

c. 0.43

d. 0.47

e. 0.29

Question 2

Continued from previous question. Assume the yield curve is flat and the T-bill rate is 5%. The market risk premium is 10%. Portfolio XY has a market beta of 2.5. What is the required rate of return for Portfolio XY?

Select one:

a. 30.0%.

b. 20.0%.

c. 17.5%.

d. 13.5%.

e. 12.5%.

Question 3

Continued from previous questions. Compare the required rate of return with the predicted rate of return (expected rate of return) of Portfolio XY, which of the following statements is most correct?

Select one:

a. The portfolio is not paying dividends.

b. The portfolio is experiencing supernormal growth.

c. The portfolio is a good buy.

d. The portfolio should be sold.

e. The portfolio has a larger expected return than most of the stocks.

Homework Answers

Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. Answer the following questions. Assume a two-stock portfolio XY is created with $6000 invested in...
1. Answer the following questions. Assume a two-stock portfolio XY is created with $6000 invested in security X and $9000 in security Y. The expected return and the variance for Portfolio XY is 23.32% and 0.45%, respectively. What is the coefficient of variation for Portfolio XY? Select one: a. 0.67 b. 0.43 c. 0.24 d. 0.47 e. 0.29 2. Continued from previous question. Assume the yield curve is flat and the T-bill rate is 5%. The market risk premium is...
An investor is forming a portfolio by investing $50,000 in stock A that has a beta...
An investor is forming a portfolio by investing $50,000 in stock A that has a beta of 1.50, and $25,000 in stock B that has a beta of 0.90. The market risk premium is equal to 6% and Treasury bonds have a yield of 4%. What is the required rate of return on the investor's portfolio? a. 11.8% b. 7.5% c. 6.6% d. 6.8% e. 7.0% Continued from previous question. Assume the predicted rate of return (expected rate of return)...
Suppose you own a portfolio with two securities. Security A has an expected return of 13.4%...
Suppose you own a portfolio with two securities. Security A has an expected return of 13.4% and a standard deviation of 55% per year. Security B has an expected return of 9.3% and a standard deviation of 32% per year. Considering that your portfolio is composed of 35% of Security A and 65% of Security B, and that the correlation between their returns is .25, what is the standard deviation of your portfolio? Select one: a. 31.68% b. 40.05% c....
You have the following information on two securities in which you have invested money: Security Expected...
You have the following information on two securities in which you have invested money: Security Expected Return Xerox 15% Kodak 12% Standard deviation 4.5% 3.8% Beta %Invested 1.20 35% 0.98 65% The rate of return on the market portfolio is 17% and the risk-free rate of return is 7.5%. a) Compute the expected return on the portfolio. b) Compute the beta of the portfolio. c) Compute the required rate of return on the portfolio using the CAPM. d) Is the...
question 3 Your portfolio consists of two stocks. You have $2000 in stock A and $8000...
question 3 Your portfolio consists of two stocks. You have $2000 in stock A and $8000 in stock B. The returns for stock A have a standard deviation of 20% and the returns for stock B have a standard deviation of 10%. The correlation coefficient between A and B is 0.6. What is your portfolio standard deviation? Select one: a. 9.8% b. 11.2% c. 6.8% d. 10.2% e. 10.9% question 4 If investors require a 5.5% nominal return and the...
Answer the following questions. A company is analyzing two mutually exclusive projects, S and L, whose...
Answer the following questions. A company is analyzing two mutually exclusive projects, S and L, whose cash flows are shown below: Year 0 Year 1 Year 2 Year 3 Year 4 Cashflow for S -200 150 100 10 10 Cashflow for L -200 10 10 100 250 Assume the company can get an unlimited amount of capital at that cost. WACC NPV (S) NPV (L) 5% 10% 15% 20% 25%    What is the internal rate of return (IRR) for...
1.Use the following information to answer the question(s) below. Suppose that the market portfolio is equally...
1.Use the following information to answer the question(s) below. Suppose that the market portfolio is equally likely to increase by 24% or decrease by 8%. Security "X" goes up on average by 29% when the market goes up and goes down by 11% when the market goes down. Security "Y" goes down on average by 16% when the market goes up and goes up by 16% when the market goes down. Security "Z" goes up on average by 4% when...
Use the following information to answer the two questions below. State of                               P
Use the following information to answer the two questions below. State of                               Prob. of the                        Rate of return if state occurs the economy                      state of economy                    Stock A         Stock B Boom                                            0.40                             0.12               0.04 Bust                                               0.60                             0.02               0.04 You MUST use 4 digits in every calculation you do in order for your answer to be the same as the one in the system. Enter answer using 4 decimals. Do not use or enter...
HW #6 1. Use the following information to answer the questions. State Probability Stock A return...
HW #6 1. Use the following information to answer the questions. State Probability Stock A return Stock B return Good Normal Bad 0.3 0.6 0.1 8% 2% -3% 5% 1% -1% (a). Given that you form a portfolio by investing $4,000 in Stock A and $1,000 in Stock B, what is the expected return on your portfolio? (b).What is the variance and standard deviation of your portfolio? (c). Suppose that Stock A has a beta of 1.5 and Stock B...
Use the following information to answer questions 4- 8: Diana wants to evaluate the stock of...
Use the following information to answer questions 4- 8: Diana wants to evaluate the stock of Eagle Inc, which is currently trading at $14.50 per share. She gathers the following information: · Current book value per share = $9.50 · ROE = 18% · Expected EPS for Year 1-3 = ROE times beginning book value per share · Dividend payout ratio = 40% · Required rate of return on equity = 10% Question: The company's residual income per share at...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT