a. What is the average expected return, r, for each asset over the 3-year period? b. What is the standard deviation, s, for each asset's expected return? c. What is the average expected return, rp, for each of the portfolios?
Q: Ayayai Industries is considering the purchase of new equipment costing $1,500,000 to replace…
A: NPV represents the value generated by an investment or a project expressed in absolute profitability…
Q: 1. Determine the internal rate of return of Investment X and Investment Y. Should X and Y be…
A: We can determine the IRR of each investment using the formula below. IRR = FVInitial…
Q: Sub : Finance Pls answer very fast.I ll upvote CORRECT ANSWER . Thank You( Dnt use CHATGPT ) If a…
A: The Economic Value Added (EVA), often known as Economic Profit, is a metric based on the Residual…
Q: Which of the following is generally excluded in estimating the weighted average cost of capital? a.…
A: Weighted Average Cost of Capital is a weighted average of the components costs of long-term debt,…
Q: TSLA stock price is currently at $600. The $700-strike European TSLA call option expiring on March…
A: To compute the Black-Scholes delta of a put option, we can use the put-call parity relationship and…
Q: Use the data in the tables below to answer the following questions: Average rates of return on…
A: Businesses examine possible significant projects or expenditures using the capital budgeting…
Q: Consider the following table, which gives a security analyst's expected return on two stocks in two…
A: The beta of the stock refers to the measurement of the stock movement in the overall market. The…
Q: Explain the graph using examples.
A: A long position in call option provides its holder the right to purchase the option at the…
Q: Flowers by Irene Inc. is also considering financing the project with 50% equity and 50% debt. The…
A: Businesses utilize the capital budgeting process to assess possible big projects or investments.…
Q: Suppose today is January 1, 2024 and you are given two options: a. an annuity that pays you 1000…
A: Annuity is fixed amount being paid at each year for the fixed period of time Perpetuity is fixed…
Q: The following information is given about an Option on a stock: S(0)=$31, X-$34, rf-9%, variance…
A: Please note that under the answering guidelines only up to 3 subparts can be answered. Kindly repost…
Q: a) What is the price of a European put option on the same stock that expires in 8months and has a…
A: Using Put Call Parity formula, we can determine the price of the put option. The formula is as…
Q: How long will it take $2400 to grow into $5760 if it's insested at 6% interest compounded…
A: Present Value = pv = $2400 Future Value = fv = $5760 Interest Rate = r = 6% Time = t = ?
Q: Denali Inc. is acquiring Whitney Corp. at an exchange ratio of 2:1. After the deal is announced,…
A: Merger arbitrage refers to the opportunity of earning profits from the disparity of the stock prices…
Q: Your company currently has $1,000 par, 5.25% coupon bonds with 10 years to maturity and a price of…
A: Bonds are the company's liabilities issued to raise the funds required to finance the company's…
Q: Chik's Chickens has accounts receivable of $5,533. Sales for the year were $9,000. What is its…
A: Average collection period = Accounts receivable * 365 / Net sales
Q: Jacob is a member of his employers defined contribution pension plan. He has pensionable earnings of…
A: As per Bartleby guidelines, only one question can be solved at a time. Please reupload other…
Q: Lucky Larry wins $6,000,000 in a state lottery. The standard way in which the state pays such…
A: Payment = p = $240,000 Time = t = 25 years Interest rate = r = 5%
Q: You are considering investing in a project with an initial outlay of $50,000 and the following year…
A: Internal Rate of Return better known as IRR is a discounting capital budgeting technique. IRR is the…
Q: Suppose a ten-year, $1,000 bond with an 8.4% coupon rate and semiannual coupons is trading for…
A: Bonds refer to the financial instrument issued for providing funds to the borrower by the…
Q: You would like to have $550,000 when you retire in 35 years. How much should you invest each quarter…
A: The amount that a present investment will gain in value over time when kept in a compound interest…
Q: A 5-year floating-rate security was issued on 1 January 2015. The coupon rate formula was 1-year…
A: LIBOR stands for the London Interbank Offered Rate. It is a benchmark interest rate that indicates…
Q: Country Bank has $350,000 of 6% debenture bonds outstanding. The bonds were issued at 106 in 2021…
A: Debenture issued at premium of 106 Total amount = $350000 Interest rate = 6% Maturity = 20 years
Q: Calculate the cost of capital of a bond selling to yeild 13% for the purchaser of the bond. The…
A: Yield to purchaser = r = 13% Tax rate = t = 34%
Q: You have decided to purchase a house. The house has a current price of $300,000 and you plan on…
A: A mortgage refers to a loan borrowed for purchasing a property where the property itself is the…
Q: You have a 25-year $400,000 mortgage with a 3.5% rate of interest (compounded monthly) that you make…
A: As per instructions, the solution will be provided on TI BA II Plus calculator. First, we need to…
Q: You have been asked by the president of your company to evaluate the proposed acquisition of a new…
A: NPV net present value is the difference between the present value of cash flow and initial…
Q: An investor purchased a fixed-coupon bond at a time when the bond's yield to maturity was 6.9%. The…
A: Yield-to-maturity (YTM) refers to the annualized return that is provided by the bond if an investor…
Q: 6. Below is a list of daily Treasury note and bond listings from Wall Street Journal. Treasury bonds…
A: A treasury bond is a kind of debt security issued by the government and private companies for…
Q: 16. What is the total variance of the following portfolio including 2 assets invested in the ratio…
A: Formula to be used: Portfolio variance=(WA2 x σ2A)+(WB2 x σ2B)+ (2 x WA x σA x WB x σB x r) Data…
Q: ( a contractor want to invest his money in on of project A or B if you know that the interest rate…
A: Net present worth represents the value generated by a project or an investment in absolute…
Q: TikTok is considering a project that will cost $ 800,000 and is expected to last for 10 years and…
A: The internal rate of return the rate of return which generated by project and it is calculated on…
Q: Assume the spot Swiss franc is $0.7045 and the six-month forward rate is $0.7040. What is the Value…
A: An option is a type of financial instrument that is based on the value of underlying securities,…
Q: Bramble Corporation had net credit sales of $14100000 and cost of goods sold of $9370000 for the…
A: Here, Net Credit Sales is $14100000 Cost of Goods Sold is $9370000 Average Inventory is $1171250
Q: Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $40 per…
A: According to bartleby guidelines , if question involves multiple sub parts , then 1 st sub 3 parts…
Q: Returns of a Single Asset. Suppose you have invested in 2 assets whose annual returns are shown in…
A: Data given: Asset A Asset B Year Annual Return Year Annual Return 1 -6.01% 1 -9.98% 2…
Q: nvestors choose deri tives
A: derivatives are financial instruments whose value is derived from an underlying asset such as bonds…
Q: For this assignment, discuss how the finance function is interrelated and connected to the other…
A: A company's finance department is in charge of overseeing the organization's finances and making…
Q: Beryl's Iced Tea currently rents a bottling machine for $52 000 per year, including all maintenance…
A: As per the given information: Rent of a bottling machine - $52,000a. Purchase price - $155,000 ;…
Q: Finance what is cost of equity as an effective annual rate given that they pay semi annually,…
A: Cost of equity is also known as KE. It is that cost which is incurred by the company for financing…
Q: Required information A potential investment has a cost of $425,000 and a useful life of 5 years.…
A: Annual cash inflows are the cash inflows incurred during the year for the purpose of calculating the…
Q: Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The…
A: NPV is also known as Net present value. It is a capital budgeting techniques which help in decision…
Q: XYZ Co is considering to purchase equipment that has 4 years of life and requires an initial capital…
A: Npv is a capital budgeting techniques. Which help in decision making on the basis of future cash…
Q: The face value of a bond is $78,000, its stated rate is 7%, and the term of the bond is five years.…
A: Face value of Bond=$78,000 Interest rate=7%=7%/2=3.5% Market rate-8%=8%/2=4% Term=5 years=5*2=10…
Q: 3. Company WACC is 20%. Debt interest rate is 4% and D/ E ratio is 1,6. What is the cost of equity?…
A: Weighted Average Cost of Capital = WACC = 20% Cost of debt = 4% Debt equity Ratio = 1.6
Q: 37) You are considering investing $1,000 in a T-bill that pays 0.05 and a risky portfolio, P,…
A: To solve the question we first need to determine the expected return of the risky portfolio and then…
Q: The S&P 500 declined 38.49 percent during 2008, its third-worse performance in history. (The largest…
A: Calculate the remaining value after the decline. To determine the remaining value after a decline of…
Q: Duo Corporation is evaluating a project with the following cash flows. The company uses a discount…
A: Here, Year Cash flows 0 $-15,400.00 1 $ 6,500.00 2 $ 7,700.00 3 $ 7,300.00…
Q: Sheffield Company has hired a consultant to propose a way to increase the company's revenues. The…
A: Net Present Value:— It is the difference between the present value of cash flows and initial capital…
Q: The following financial data for a firm is provided to you. Calculate the Operating Cash Flow and…
A: Operating cash flow (OCF) the cash flow a firm generates from its normal operations calculated as…
Step by step
Solved in 3 steps with 3 images
- You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 12 percent and 15 percent, respectively. The standard deviations of the assets are 29 percent and 48 percent, respectively. The correlation between the two assets is .25 and the risk-free rate is 5 percent. What is the optimal Sharpe ratio in a portfolio of the two assets? What is the smallest expected loss for this portfolio over the coming year with a probability of 2.5 percent?You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 13 percent and 16 percent, respectively. The standard deviations of the assets are 39 percent and 47 percent, respectively. The correlation between the two assets is 61 and the risk-free rate is 5.3 percent. What is the optimal Sharpe ratio in a portfolio of the two assets? What is the smallest expected loss for this portfolio over the coming year with a probability of 1 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your Sharpe ratio answer to 4 decimal places and the z-score value to 3 decimal places when calculating your answer. Enter your smallest expected loss as a percent rounded to 2 decimal places.) Sharpe ratio Smallest expected loss %You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 9 percent and 14 percent, respectively. The standard deviations of the assets are 25 percent and 33 percent, respectively. The correlation between the two assets is .33 and the risk - free rate is 4.2 percent. What is the optimal Sharpe ratio in a portfolio of the two assets? What is the smallest expected loss for this portfolio over the coming year with a probability of 2.5 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your Sharpe ratio answer to 4 decimal places and the z-score value to 3 decimal places when calculating your answer. Enter your smallest expected loss as a percent rounded to 2 decimal places.)
- Find the expected portfolio return and standard deviation if you were to invest 50% of your portfolio in Asset B, 50% in Asset C, with no allocation to Asset A. Compute your answers to the nearest tenth of a basis point. (See attached data file) We know that Asset A: B: C: expected return: 1.16 1.35 1.38 expected standard deviation: 2.88 1.58 2.19Two investments generated the following annual returns: % -Select- a. What is the average annual return on each investment? Round your answers to one decimal place. The average annual rate of return on X: The average annual rate of return on Y: b. What is the standard deviation of the return on investments X and Y? Round your answers to two decimal places. Standard deviation of X: % Standard deviation of Y: c. Based on the standard deviation, which investment was riskier? was riskier. 20X0 20X1 20X2 20X3 20X4 Investment X 11% 22 30 16 9 Investment Y 22% 24 10 13 12Darren is considering the following investments; Alphabet, PayZero and FNQ Res.: Probability of return (%) Likely Return Alphabet (%) Likely Return PayZero (%) Likely Return FNQ Res. (%) 20 6 4 9 30 9 7 14 40 16 10 19 10 18 14 26 a) Calculate the expected return for each asset.b) Calculate the expected return on a portfolio comprising each asset weighted as follows Asset Weighting (%) Weighting (%) Alphabet 20 PayZero 55 FNQ Res. 25 c) Explain to Darren the benefit of combining the assets into a portfolio instead of undertaking individual investments in Alphabet, PayZero and FNQ Res. d) Calculate the risk attached to each of the investments proposed in Alphabet, PayZero and FNQ Res. Rank each investment in regard to its risk and return. Discuss the likely range of returns that could eventuate for each asset with a 95% level of accuracy. ONLY ANSWER PART C AND D PLEASE
- Suppose the average return on Asset A is 6.6 percent and the standard deviation is 8.6 percent and the average return and standard deviation on Asset B are 3.8 percent and 3.2 percent, respectively. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel® to answer the following questions. a. What is the probability that in any given year, the return on Asset A will be greater than 11 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the probability that in any given year, the return on Asset B will be greater than 11 percent? Less than 0 percent? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. In a particular year, the return on Asset A was −4.25 percent. How likely is it that such a low return will recur at some point in the future? (Do…You are evaluating various investment opportunities currently available and you have calculated expected returns and standard deviation for five different well-diversified portfolios of risky assets. Portfolio Expected return (%) Standard deviation (%) 7.8 10.5 R 10 14 S 4.6 11.7 18.5 6.2 7,5 a. For each portfolio, determine the Sharpe ratio. Assume that the risk free rate is 3%. b. Using your analysis in part (a), explain which of these five portfolios is most likely to be the market portfolio. Draw up the Capital Market Line Equation. c. If you are willing to make an investment with a standard deviation of 7%, is it possible for you to earn 7%? d. What is the minimum risk level that would be necessary for an investment to earn 7%. What is the composition of the portfolio along the CML that will generate the 7% return. e. Suppose you are now willing to make an investment with a standard deviation of 18.2%. Determine what would be the investment proportions in the risk free asset and…Darren is considering the following investments; Alphabet, PayZero and FNQ Res.: Probability of return (%) Likely Return Alphabet (%) Likely Return PayZero (%) Likely Return FNQ Res. (%) 20 6 4 9 30 9 7 14 40 16 10 19 10 18 14 26 a) Calculate the expected return for each asset. b) Calculate the expected return on a portfolio comprising each asset weighted as follows Asset Weighting (%) Weighting (%) Alphabet 20 PayZero 55 FNQ Res. 25 c) Explain to Darren the benefit of combining the assets into a portfolio instead of undertaking individual investments in Alphabet, PayZero and FNQ Res. d) Calculate the risk attached to each of the investments proposed in Alphabet, PayZero and FNQ Res. Rank each investment in regard to its risk and return. Discuss the likely range of returns that could eventuate for each asset with a 95% level of accuracy.
- Marcus has an investment portfolio that paid the rate of return of 24.75%, -11%, - 30%, 19%, 15.5%, 12% and 20% over the last seven (7) years. Required: a) Calculate the arithmetic average return and the geometric average return of this portfolio. b) Discuss the difference between arithmetic average return and the geometric average return. When should Marcus use a specific average return? c) If the following information is available for Marcus’s portfolio in the forecast for next year, calculate the expected return and identify the risk of return by computing the variance and the standard deviation. State of economy Boom Normal Recession Question 5 Probability of the economic state 0.55 0.30 0.15 Rate of Return 25% 17% -8%Assume you have two assets A and B. You know the expected return and standard deviation of returns for each asset. This information is shown in the table below. You plan to put 50% of your wealth into each assets. What would the expected return be for the portfolio? Asset A B 0.03 0.27 0.135 0.15 returns 12% 15% standard deviations 20% 40%Assume a Portfolio of two assets A and B whose standard deviations of their returns are 8.6% and 10.8% respectively, while their correlation coefficient of returns is Pas= - 0.61. You are given the right to do portfolio optimization without restrictions. What proportions would you choose and why?