Questions from Corporate Finance

Q: Explain why a characteristic of an efficient market is that investments in

Explain why a characteristic of an efficient market is that investments in that market have zero NPVs.

Q: A study analyzed the behavior of the stock prices of firms that

A study analyzed the behavior of the stock prices of firms that had lost antitrust cases. Included in the diagram are all firms that lost the initial court decision, even if the decision was later ove...

Q: Suppose you bought a 6 percent coupon bond one year ago for

Suppose you bought a 6 percent coupon bond one year ago for $1,040. The bond sells for $1,063 today. a. Assuming a $1,000 face value, what was your total dollar return on this investment over the past...

Q: Using the following returns, calculate the average returns, the variances

Using the following returns, calculate the average returns, the variances, and the standard deviations for X and Y:

Q: Based on the following information, calculate the expected return and standard

Based on the following information, calculate the expected return and standard deviation for the two stocks:

Q: Briefly explain why the covariance of a security with the rest of

Briefly explain why the covariance of a security with the rest of a well-diversified portfolio is a more appropriate measure of the risk of the security than the security’s variance.

Q: A portfolio is invested 10 percent in Stock G, 65 percent

A portfolio is invested 10 percent in Stock G, 65 percent in Stock J, and 25 percent in Stock K. The expected returns on these stocks are 9 percent, 11 percent, and 14 percent, respectively. What is t...

Q: You are forming an equally weighted portfolio of stocks. Many stocks

You are forming an equally weighted portfolio of stocks. Many stocks have the same beta of .84 for Factor 1 and the same beta of 1.69 for Factor 2. All stocks also have the same expected return of 11...

Q: Both Dow Chemical Company, a large natural gas user, and

Both Dow Chemical Company, a large natural gas user, and Superior Oil, a major natural gas producer, are thinking of investing in natural gas wells near Houston. Both are all-equity financed companies...

Q: Fama’s Llamas has a weighted average cost of capital of 9.

Fama’s Llamas has a weighted average cost of capital of 9.8 percent. The company’s cost of equity is 13 percent, and its cost of debt is 6.5 percent. The tax rate is 35 percent. What is Fama’s debt–eq...