If you expect the market to increase which of the following
portfolios should you purchase?
Select one:
a. a portfolio with a beta of 1.0
b. a portfolio with a beta of 0
c. a portfolio with a beta of -0.5
d. a portfolio with a beta of 1.9
A firm is evaluating an investment proposal which has an initial
investment of $5,000 and cash flows presently valued at $4,000. The
net present value of the investment is ______.
Select one:
a. $9,000
b. -$4,000
c. -$1,000
d. $4,000
Please Solve As soon as
Solve quickly I get you two UPVOTE directly
Thank's
Abdul-Rahim Taysir
1st Answer:
The correct option is "d"
when you are expecting the market to increase, so you should buy a portfolio whose beta with the market is high. The portfolio with 1.9beta means that if the market increases by 1 then the portfolio will increase by 1.9times.
2nd Answer:
The correct option is "c"
Net Present value = Present value of cash flow to be received - Initial Investment
= 4000 - 5000
= -1000
it shows that the investment is more than what the project will produce.
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