Questions from Corporate Finance

Q: In footnote 4, we noted that the minimum-risk portfolio

In footnote 4, we noted that the minimum-risk portfolio contained an investment of 53% in Amazon and 47% in Southwest Airlines. Prove it. (Hint: You need a little calculus to do so.)

Q: Analysis of 60 monthly rates of return on United Futon common stock

Analysis of 60 monthly rates of return on United Futon common stock indicates a beta of 1.45 and an alpha of –.2% per month. A month later, the market is up by 5%, and United Futon is up by 6%. What i...

Q: Look again at the set of the three efficient portfolios that we

Look again at the set of the three efficient portfolios that we calculated in Section 8-1. a. If the interest rate is 5%, which of the three efficient portfolios should you hold? b. How would your ans...

Q: The following question illustrates the APT. Imagine that there are only

The following question illustrates the APT. Imagine that there are only two pervasive macroeconomic factors. Investments X, Y, and Z have the following sensitivities to these two factors: We assume th...

Q: a. Plot the following risky portfolios on a graph:

a. Plot the following risky portfolios on a graph: b. Five of these portfolios are efficient, and three are not. Which are inefficient ones? c. Suppose you can also borrow and lend at an interest rate...

Q: Look back at the calculation for Southwest Airlines and Amazon in Section

Look back at the calculation for Southwest Airlines and Amazon in Section 8-1. a. Recalculate the expected portfolio return and standard deviation for different values of x1 and x2, assuming the corre...

Q: Mark Harrywitz proposes to invest in two shares, X and Y

Mark Harrywitz proposes to invest in two shares, X and Y. He expects a return of 12% from X and 8% from Y. The standard deviation of returns is 8% for X and 5% for Y. The correlation coefficient betwe...

Q: Ebenezer Scrooge has invested 60% of his money in share A

Ebenezer Scrooge has invested 60% of his money in share A and the remainder in share B. He assesses their prospects as follows: a. What are the expected return and standard deviation of returns on his...

Q: Here are returns and standard deviations for four investments. /

Here are returns and standard deviations for four investments. Calculate the standard deviations of the following portfolios. a. 50% in Treasury bills, 50% in stock P. b. 50% each in Q and R, assuming...

Q: Percival Hygiene has $10 million invested in long-term corporate

Percival Hygiene has $10 million invested in long-term corporate bonds. This bond portfolio’s expected annual rate of return is 9%, and the annual standard deviation is 10%. Amanda Reckonwith, Perciva...