Question

Question 1

____is the chance of loss or the variability of returns associated with a given asset.

Question 2

Baxter purchased 100 shares of Sam, Inc. common stock for $135 per share one year ago. During the year, Sam, Inc paid cash dividends of $6 per share. The stock is currently selling for $170. If Baxter sells all his shares today, what rate of return would be realized?

Question 3

A beta coefficient of +1 represents an asset that…

Question 4

An investment banker has recommended a $100,000 portfolio consisting of assets B, D, & F. $30,000 will be invested in asset B with a beta of .5; $20,000 will be invested in asset D with a beta of 1.5; and $50,000 will be invested in asset F with a beta of 0.9. The beta of this portfolio is:

Question 5

Aset P has a beta of 1.2. The risk-free rate of return is 2%, while the return on the S&P 500 is 8%. Asset P's required rate of return is:

Question 6

A corporate bond is sold for $1,000 (par value) with a 5% coupon. Shortly thereafter interest rates in the economy (the nominal rate of interest) increases to 9% due to inflation worries. Given this scenario (all other things being equal), which of the following bond valuations for this bond in the secondary market would most likely happen: $1,000; $1180, $2,196, nothing

Question 7

Considering the CAPM, which of the following is most useful: 90-day T-Bill, Prime rate, company net income, or depreciation from the balance sheet?

Question 8

BOND VALUATION - Ch 6 and pages OM 11-14: In 2014Carnival Cruise Lines decided to sell some new bonds (something about fixing a big ship). They sold the bonds for $1,000 (face value) with a 20 year maturity and an 7% coupon. Two years have passed. Interest rates on similar bonds have declined to 4%. If an owner attempts to sell her/his Carnival bond bought for $1,000 in 2014, what should they expect to receive for it in the secondary market?

Question 9

Continuing with question 8 above. Let's say that interest rates stayed at 7% (didn't fall to 4%) and they will stay there for at least the next 5 years. What would be the value of Carnival's bonds in 2018?

Question 10

The Going to the Sun Highway in Glacier National Park - located in northwestern Montana - is one of the most spectacular drives in North America. Unfortunately the road needs to be resurfaced due to many harsh winters. The State of Montana has decided to sell state bonds to cover the needed repairs, AMontana state savings bond can be converted to $2000 at maturity six years from purchase. If the state bonds are to be competitive with U.S. savings bonds, which pay 9% annual interest (compounded annually), at what price must Montana sell its bonds? (Assume no cash payments on savings bonds prior to redemption.)

Question 11

Risk & return is a classic item in finance. You would like to
estimate what the return on General Electric stock could be given
it's beta of 2. Other data you have collected: the rate of return
on 90 day T-Bills is 1.5%, on 5 year T-Notes it 4% and on the "long
bond", the 30-year T- Bond = 6.5%. The Prime is 8%, LIBOR is 5.5%
and the average return on the overall stock market is estimated to
be 8%.

OK
again, what do you expect the rate of return on G.E.'s stock to
be?

Hint: note that term "beta" - there's a classic formula that uses "beta"!

Question 12

Looking at a list of beta coefficients you spot a number of stocks as possible buys for your new stock portfolio. You have $125,000 to invest. You have decided to have just three stocks in your portfolio (this will make it easier to follow than a portfolio of more stocks). You have selected two already: The Gap with a beta of .4 and Disney with a beta of .95. You have invested $15,000 in each. For the final selection you are looking at Ford with a beta of 1.56, ebay with a beta of .88, IBM with a beta of 0.99 and the parent of Anheuser-Busch with a beta of 1.2. You would like the overall beta of your portfolio to be as close to "the market" or "average stock" as possible.

Answer #1

1) Risk is the chance of loss or the variability of returns associated with a given asset.

2) return on stock = [(P1 - P0) + Dividend] / P0

Here P1 = sell price of stock P0 = stock purchase price

= [(170 - 135) + 6 ] / 135

return on stock = 30.37%

3) A beta coefficent of +1 represents an asset that high risk.

4 ) firstly calculate the weight of the amount invested in B,D&F

Assets | Amount invested | Weight |

B | 30000 | 0.3 (30,000/100,000) |

D | 20000 | 0.2 (20,000/100000) |

F | 50,000 | 0.5 (50,000/100,000) |

Total | 100000 | 1 |

Portfolio beta

Assets | Weight | Beta | Portfolio beta |

B | 0.3 | 0.5 | 0.15 |

D | 0.2 | 1.5 | 0.3 |

F | 0.5 | 0.9 | 0.45 |

Total | 1 | 0.9 |

Portfolio beta = 0.9

Question 9
Continuing with question 8 above. Let's say that interest
rates stayed at 7% (didn't fall to 4%) and they will stay there for
at least the next 5 years. What would be the value of Carnival's
bonds in 2018?
Question 10
The Going to the Sun Highway in Glacier National Park -
located in northwestern Montana - is one of the most spectacular
drives in North America. Unfortunately the road needs to be
resurfaced due to many harsh...

Question 8
BOND VALUATION - Ch 6 and pages OM 11-14: In 2014 Carnival
Cruise Lines decided to sell some new bonds (something about fixing
a big ship). They sold the bonds for $1,000 (face value) with a 20
year maturity and an 7% coupon. Two years have passed. Interest
rates on similar bonds have declined to 4%. If an owner attempts to
sell her/his Carnival bond bought for $1,000 in 2014, what should
they expect to receive for it...

Given the following probability distribution, what are the
expected return and the standard
deviation of returns for Security J?
State Pi rj
1 0.2 12%
2 0.3 4%
3 0.5 17%
Group of answer choices
12.10%; 5.93%
12.30%; 5.63%
12.40%; 5.63%
12.30%; 5.93%
12.10%; 5.63%
Suppose you hold a diversified portfolio consisting of a $6,485
invested equally
in each of 20 different common stocks. The
portfolio’s beta is 0.81. Now
suppose you decided to sell one of your stocks that has a beta
of 1.4 and to
use the proceeds...

Question 5
Aset P has a beta of 1.2. The risk-free rate of return is 2%,
while the return on the S&P 500 is 8%. Asset P's required rate
of return is:
Question 6
A corporate bond is sold for $1,000 (par value) with a 5%
coupon. Shortly thereafter interest rates in the economy (the
nominal rate of interest) increases to 9% due to inflation worries.
Given this scenario (all other things being equal), which of the
following bond valuations...

7.You have a $1,000 portfolio which is invested in stocks A and
B plus a risk-free asset. $400 is invested in stock A. Stock A has
a beta of 1.3 and stock B has a beta of 0.7. You want a portfolio
beta of 0.9.
a.How much needs to be invested in stock B?
b.How much needs to be invested in the risk-free asset?

Suppose you hold a diversified portfolio consisting of a $12,356
invested equally
in each of 10 different common stocks. The
portfolio’s beta is 1.39. Now
suppose you decided to sell one of your stocks that has a beta
of 1 and to
use the proceeds to buy a replacement stock with a beta of
1. What would
the portfolio’s new beta be?
1.19
1.49
1.39
1.09
1.29
The risk-free rate is 3 percent. Stock A has a beta =
1.3 and Stock B has...

You have just invested in a portfolio of three stocks. The
amount of money that you invested in each stock and its beta are
summarized below. Stock Investment Beta A $210,000 1.47 B 315,000
0.61 C 525,000 1.16 Calculate the beta of the portfolio and use the
Capital Asset Pricing Model (CAPM) to compute the expected rate of
return for the portfolio. Assume that the expected rate of return
on the market is 16 percent and that the risk-free rate...

You have just invested in a portfolio of three stocks. The
amount of money that you invested in each stock and its beta are
summarized below.
Stock
Investment
Beta
A
$188,000
1.51
B
282,000
0.52
C
470,000
1.35
Calculate the beta of the portfolio and use the capital asset
pricing model (CAPM) to compute the expected rate of return for the
portfolio. Assume that the expected rate of return on the market is
18 percent and that the risk-free rate...

IV. You currently hold a diversified portfolio with a beta of
1.1. The value of your investment is $500,000. The risk-free rate
is 3%, the expected return on the market is 8%.
a) Using the CAPM, calculate the expected return on your
portfolio.
b) Suppose you sell $10,000 worth of Chevron stock (which is
currently part of the portfolio) with a beta of 0.8 and replace it
with $10,000 worth of JP Morgan stock with a beta of 1.6. What...

answer with 100
words
1. A company has
an outstanding issue of $1,000- par-value bonds with a 12% coupon
interest rate. The issue pays interest annually and has 16
years remaining to its maturity date. Describe the two
possible reasons why similar-risk bonds are currently earning a
return below the coupon interest rate on the ABC bond.
2. Do you think it is a good idea to have a
negative beta asset (e.g. a stock) in your portfolio during a...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 1 minute ago

asked 12 minutes ago

asked 20 minutes ago

asked 26 minutes ago

asked 42 minutes ago

asked 51 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago