At the beginning of 2021 Lemon Company has a share price of $3.00, and a beta...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
At the beginning of 2021 Lemon Company has a share price of $3.00, and a beta of 2, whereas Lime Company shares have a beta of 1.5 and a share price of $4.80. If the risk-free interest rate is 4% and the expected return of the market portfolio is 10%, according to the capital asset pricing model: Please note that you do not need to type the "$ and %" symbol. Please only type numerical or words, no symbols. Required: 23(a) What is the expected return of Lemon Company shares? (2 marks) Please answer to 2 decimal places. Answer - % 23(b) What is the expected return of Lime Company shares? (2 marks) Please answer to 2 decimal places. Answer - % 23(c) What is the beta of a portfolio that consists of 40% Lemon Shares and 60% Lime shares? (3 marks) Please answer to 2 decimal places. Answer - 23(d) What is the expected return of a portfolio that consists of 40% Lemon Shares and 60% Lime shares? (3 marks) Please answer to 2 decimal places. Answer - % At the beginning of 2021 Lemon Company has a share price of $3.00, and a beta of 2, whereas Lime Company shares have a beta of 1.5 and a share price of $4.80. If the risk-free interest rate is 4% and the expected return of the market portfolio is 10%, according to the capital asset pricing model: Please note that you do not need to type the "$ and %" symbol. Please only type numerical or words, no symbols. Required: 23(a) What is the expected return of Lemon Company shares? (2 marks) Please answer to 2 decimal places. Answer - % 23(b) What is the expected return of Lime Company shares? (2 marks) Please answer to 2 decimal places. Answer - % 23(c) What is the beta of a portfolio that consists of 40% Lemon Shares and 60% Lime shares? (3 marks) Please answer to 2 decimal places. Answer - 23(d) What is the expected return of a portfolio that consists of 40% Lemon Shares and 60% Lime shares? (3 marks) Please answer to 2 decimal places. Answer - %
Expert Answer:
Answer rating: 100% (QA)
Okay here are the calculations 23a Risk free rate 4 Market portfolio expected return 10 B... View the full answer
Posted Date:
Students also viewed these accounting questions
-
[The following information applies to the questions displayed below.] Julie paid a day care center to watch her two-year-old son while she worked as a computer programmer for a local start-up...
-
When the variability around the regression line is the same for all values of the independent variable X this is referred to a
-
Question: Old MathJax webview Old MathJax webview i need ans of these question but the source is alot Old MathJax webviewOld MathJax webview i need ans of these question but the source is alot these...
-
Download a copy of the ACFE Compensation Guide for Anti-fraud Professionals, which is available at no charge at: www.acfe.com/documents/2008-comp-guide.pdf. Based on this resource, answer the...
-
Utilities hold 10 percent of total assets in current assets; retail trade industries hold 60 percent of total assets in current assets. Explain how industry characteristics account for this...
-
Design a 16-bit memory of total capacity 8192 bits using SRAM chips of size 64 1 bit. Give the array configuration of the chips on the memory board showing all required input and output signals for...
-
According to the CAPM, what is the rate of retum of a portfolio with a beta of 1? a. b. c. d. between R and R the risk-free rate, R beta (R-R) the return on the market, R
-
Coca-Cola is a well-established consumer products company with a strong position in the global market. The sales of their core soda products have remained relatively stable for decades, yet the...
-
Sachs Brands's defined benefit pension plan specifies annual retirement benefits equal to 1.4% service years final year's salary, payable at the end of each year. Angela Davenport was hired by Sachs...
-
AirQual Test Corporation provides on-site air quality testing services. The company has provided the following cost formulas and actual results for the month of February. Revenue Technician wages...
-
In connection with current problems relating to audited financial statements it has been stated that: The bulk of the problems can be traced to a single crucial flaw in the basic structure (of the...
-
It has been observed that "there is a certain apparent similarity between notes to financial statements and qualifications in the auditor's report: both are means by which the auditor may be certain...
-
The independent auditor issues a report at the end of the audit. Refer to the standard report in the chapter. 1 What is the difference between (a) "generally accepted auditing standards" and (b)...
-
Discuss the following observation recently made by a businessman: "Published financial statements should be designed to enable the efficiency and skill of management to be evaluated."
-
Minker expresses an unqualified opinion concerning the financial statements of the Zee Company, in which statements the basis of valuation of the fixed assets is not shown. She is aware of the fact...
-
The ceo of the company receives a loan of 120000 from her company. She uses thr money to purchase a principal residence. If she is charged 4% pa interest on the loan, what is the taxable value if the...
-
If the joint cost function for two products is C(x, y) = xy2 + 1 dollars (a) Find the marginal cost (function) with respect to x. (b) Find the marginal cost with respect to y.
-
A company purchases a machine for $96,000 on January I, 2005. Its useful life is five years or 100,000 units of product, and its salvage value is $8,000. During 2005, 10,000 units of product are...
-
On August 2, 2005, JLK Co. receives a $5,500, 90-day, 12% note from customer Tom Menke as payment on his $5,500 account. Prepare JLKs journal entries for August 2 and for the notes maturity date...
-
In early January 2005, a company acquires equipment for $3,800.The company estimates this equipment to have a useful life of three years and a salvage value of $200. Early in 2007, the company...
Study smarter with the SolutionInn App