You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is
Question:
You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 12.1 percent. If Stock X has an expected return of 11.3 percent and a beta of 1.15, and Stock Y has an expected return of 9.1 percent and a beta of .85, how much money will you invest in Stock Y? How do you interpret your answer? What is the beta of your portfolio?
Step by Step Answer:
We are given the expected return of the assets in the portfolio We also know the sum of the we...View the full answer
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
Related Video
Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.
Students also viewed these Business questions
-
You have $1 million to invest, and you must invest all your money. The following are assets you can invest: Expected Return Beta Risk-free asset 6% Not given Stock X 30% 1.8 Stock Y 20% 1.3 (a)...
-
You have $100,000 to invest in a portfolio containing Stock X, Stock Y, and a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 13...
-
You have $10,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 12 percent and Stock Y with an expected return of 9.5 percent. If your goal is to create a...
-
The joint density function of the discrete random variable (X, Y) is given in Table. (a) Find E(XY). (b) Find Cov (X, Y). (c) Find the correlation coefficient ?X, Y. xl 1 2 1 y 2 3 3 1515 6 0
-
The macro of Fig. 12-7(b) is clearly much more efficient than the procedure of Fig. 12-7(a). One disadvantage, however, is that it is hard to read. Are there any other disadvantages? If so, what are...
-
What is vertical integration? Give examples of backward and forward integration. lop5
-
L.L.Bean has a 100 percent satisfaction guaranteed policy on all of its products. What features of a pair of pants from L.L.Bean would be part of the actual product and which would be part of the...
-
Reco Corp. is expected to pay a dividend of $2.25 next year. The forecast for the stock price a year from now is $37.50. If the required rate of return is 14 percent, what is the current stock price?...
-
Ruby Company produces a chair for which the standard specifies 5 yards of material per unit. The standard price of one yard of material is $7.50. During the month, 8,500 chairs were manufactured,...
-
Lennon Industries had the following transactions. 1. Borrowed $5,000 from the bank by signing a note. 2. Paid $3,900 cash for a computer. 3. Purchased $650 of supplies on account. Instructions a....
-
Based on the following information, calculate the expected return and standard deviation of each of the following stocks. Assume each state of the economy is equally likely to happen. What are the...
-
You want to create a portfolio equally as risky as the market, and you have $1 million to invest. Given this information, fill in the rest of the following table: Asset Investment Beta Stock A...
-
Nitrogen gas at \(25^{\circ} \mathrm{C}\) and \(1 \mathrm{~atm}\), with \(C_{p}=7 \mathrm{cal} / \mathrm{mol}-\mathrm{K}\), is cooled to \(-100^{\circ} \mathrm{C}\) at \(1 \mathrm{~atm}\). Assuming...
-
The following information is available for two different types of businesses for the 2011 accounting period. Dixon Consulting is a service business that provides consulting services to small...
-
Marino Basket Company had a \(\$ 6,200\) beginning balance in its Merchandise Inventory account. The following information regarding Marino's purchases and sales of inventory during its 2011...
-
On March 6, 2011, Bob's Imports purchased merchandise from Watches Inc. with a list price of \(\$ 31,000\), terms \(2 / 10, n / 45\). On March 10, Bob's returned merchandise to Watches Inc. for...
-
The following events apply to Tops Gift Shop for 2012, its first year of operation: 1. Acquired \(\$ 45,000\) cash from the issue of common stock. 2. Issued common stock to Kayla Taylor, one of the...
-
Indicate whether each of the following costs is a product cost or a period (selling and administrative) cost. a. Transportation-in. b. Insurance on the office building. c. Office supplies. d. Costs...
-
In problem use (1) to find the general solution of the given differential equation on (0, ). x 2 y'' + xy' + (x 2 1)y = 0
-
Per Bag Direct materials: 25 pounds of CWhiz-2000 @ $0.08/lb. = $ 2.00 Direct labor: 0.05 hour @ $32.00/hr. = $ 1.60 The company manufactured 100,000 bags of Cheese-Be-Good in December and used...
-
Explain why the after tax borrowing rate is the appropriate discount rate to use in lease evaluation.
-
Critics have charged that compensation to top management in the United States is too high and should be cut back. For example, focusing on large corporations, Mario Gabelli of GAMCO Investors was...
-
In 1969, Tom Warren founded East Coast Yachts. The companys operations are located near Hilton Head Island, South Carolina, and the company is structured as a sole proprietorship. The company has...
-
Physical Units Method, Relative Sales Value Method Farleigh Petroleum, Inc., is a small company that acquires high - grade crude oil from low - volume production wells owned by individuals and small...
-
A proposed $2.5 M investment in new equipment at a 100 MG/y M&Ms factory will save the plant $800,000/y in energy costs. Assuming an annual interest rate of 5%/y (compounded annually), and an...
-
Brief Exercise 10-7 Coronado Company obtained land by issuing 2,250 shares of its $14 par value common stock. The land was recently appraised at $103,240. The common stock is actively traded at $44...
Study smarter with the SolutionInn App