Questions from Financial Management

Q: Assume that you recently graduated and landed a job as a financial

Assume that you recently graduated and landed a job as a financial planner with Cicero Services, an investment advisory company. Your first client recently inherited some assets and has asked you to e...

Q: You have observed the following returns over time: /

You have observed the following returns over time: Copyright Assume that the risk-free rate is 6% and the market risk premium is 5%. a. What are the betas of Stocks X and Y? b. What are the required...

Q: Your investment club has only two stocks in its portfolio. $

Your investment club has only two stocks in its portfolio. $20,000 is invested in a stock with a beta of 0.7, and $35,000 is invested in a stock with a beta of 1.3. What is the portfolio’s beta?

Q: AA Industries’ stock has a beta of 0.8. The

AA Industries’ stock has a beta of 0.8. The risk-free rate is 4% and the expected return on the market is 12%. What is the required rate of return on AA’s stock?

Q: Suppose that the risk-free rate is 5% and that

Suppose that the risk-free rate is 5% and that the market risk premium is 7%. What is the required return on (1) the market, (2) a stock with a beta of 1.0, and (3) a stock with a beta of 1.7?

Q: An analyst has modeled the stock of a company using the Fama

An analyst has modeled the stock of a company using the Fama-French threefactor model. The risk-free rate is 5%, the market return is 10%, the return on the SMB portfolio (rSMB) is 3.2%, and the retur...

Q: A stock’s return has the following distribution: /

A stock’s return has the following distribution: Calculate the stock’s expected return and standard deviation.

Q: The market and Stock J have the following probability distributions:

The market and Stock J have the following probability distributions: a. Calculate the expected rates of return for the market and Stock J. b. Calculate the standard deviations for the market and Stoc...

Q: Suppose rRF 5 5%, rM 5 10%, and rA 5

Suppose rRF 5 5%, rM 5 10%, and rA 5 12%. a. Calculate Stock A’s beta. b. If Stock A’s beta were 2.0, then what would be A’s new required rate of return?

Q: Carter Enterprises can issue floating-rate debt at LIBOR + 2

Carter Enterprises can issue floating-rate debt at LIBOR + 2% or fixed-rate debt at 10%. Brence Manufacturing can issue floating-rate debt at LIBOR + 3.1% or fixed-rate debt at 11%. Suppose Carter iss...