Business, 28.11.2019 06:31 kaitttt

Stock a has an expected return of 12%, a beta of 1.2, and a standard deviation of 20%. stock b also has a beta of 1.2, but its expected return is 10% and its standard deviation is 15%. portfolio ab has $900,000 invested in stock a and $300,000 invested in stock b. the correlation between the two stocks' returns is zero (that is, ra, b = 0). which of the following statements is correct?

a. portfolio ab's expected return is 11.0%.

b. portfolio ab's beta is less than 1.2.

c. portfolio ab's standard deviation is 17.5%.

d. the stocks are not in equilibrium based on the capm; if a is valued correctly, then b is overvalued.

e. the stocks are not in equilibrium based on the capm; if a is valued correctly, then b is undervalued.

show work / formulas in excel!

Answers: 3

Show answers

Another question on Business

Business, 22.06.2019 02:20

Neon light company of kansas city ships lamps and lighting appliances throughout the country. ms. neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by one and one-half days. furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. the bank has a remote disbursement center in florida. a. if neon light company has $2.90 million per day in collections and $1.18 million per day in disbursements, how many dollars will the cash management system free up?

Answers: 2

Answer

Business, 22.06.2019 11:10

Robert black, regional manager for ford in texas and oklahoma, faced a dilemma. the ford f-150 pickup truck was the best-selling pickup ever, yet ford's headquarters in detroit had decided to introduce a completely redesigned f-150. how could mr. black sell both trucks at the same time? he still had "old" f-150s in stock. in his advertising, mr. black referred to the new f-150s as follows: "not a better f-150. just the only truck good enough to be the next f-150." this statement represents ford's of the new f-150.

Answers: 2

Answer

Business, 22.06.2019 12:20

Bdj co. wants to issue new 22-year bonds for some much-needed expansion projects. the company currently has 9.2 percent coupon bonds on the market that sell for $1,132, make semiannual payments, have a $1,000 par value, and mature in 22 years. what coupon rate should the company set on its new bonds if it wants them to sell at par?

Answers: 3

Answer

Business, 22.06.2019 22:00

Acompany's sales in year 1 were $300,000, year 2 were $351,000, and year 3 were $400,000. using year 2 as a base year, the sales percent for year 3 is

Answers: 2

Answer

You know the right answer?

Stock a has an expected return of 12%, a beta of 1.2, and a standard deviation of 20%. stock b also...

Questions