Questions from Corporate Finance

Q: Describe the Capital Asset Pricing Model (CAPM) and what it

Describe the Capital Asset Pricing Model (CAPM) and what it tells us?

Q: The distribution of grades in an introductory finance class is normally distributed

The distribution of grades in an introductory finance class is normally distributed, with an expected grade of 75. If the standard deviation of grades is 7, in what range would you expect 95 percent o...

Q: Barbara is considering investing in a company’s stock and is aware that

Barbara is considering investing in a company’s stock and is aware that the return on that investment is particularly sensitive to how the economy is performing. Her analysis suggest...

Q: Ben would like to invest in gold and is aware that the

Ben would like to invest in gold and is aware that the returns on such an investment can be quite volatile. Use the following table of states, probabilities, and returns to determine the expected retu...

Q: John is watching an old game show rerun on television called Let’s

John is watching an old game show rerun on television called Let’s Make a Deal in which the contestant chooses a prize behind one of two curtains. Behind one of the curtains is a gag prize worth $150,...

Q: Using the information from Problems 7.17, 7.18

Using the information from Problems 7.17, 7.18, and 7.19, calculate the coefficient of variation for each of the investments in those problems?

Q: Emmy is analyzing a two-stock portfolio that consists of a

Emmy is analyzing a two-stock portfolio that consists of a utility stock and a commodity stock. She knows that the return on the utility stock has a standard deviation of 40 percent and the return on...

Q: You have constructed a diversified portfolio of stocks such that there is

You have constructed a diversified portfolio of stocks such that there is no unsystematic risk. Explain why the expected return of that portfolio should be greater than the expected return of a risk-f...

Q: The Ellicott City Ice Cream Company management has just completed an assessment

The Ellicott City Ice Cream Company management has just completed an assessment of the company’s assets and liabilities and has obtained the following information. The firm has total current assets wo...

Q: Write out the equation for the covariance in the returns of two

Write out the equation for the covariance in the returns of two assets, Asset 1 and Asset 2. Using that equation, explain the easiest way for the two asset returns to have a covariance of zero?