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10 15 14 help me please. thank you for your help. I am buying a firm with an expected perpetual cash flow of $420 but
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help me please. thank you for your help.
I am buying a firm with an expected perpetual cash flow of $420 but am unsure of its risk. If I think the beta of the firm is , when the beta is really 1, how much more will offer for the firm than it is truly worth? Assume the risk-free rate is 7% and the expected rate of return on the market is 15%. (Input the amount as a positive value.) Present value difference Suppose two factors are identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 3% and IR 5%. A stock with a beta of 1 on IP and 0.5 on IR currently is expected to provide a rate of return of 15%. If industrial production actually grows by 4%, while the inflation rate turns out to be 7%, what is your best guess for the rate of return on the stock? (Round your answer to 1 decimal place.) Rate of return % Assume the return on a market index represents the common factor and all stocks in the economy have a beta of 1. Firm-specific returns all have a standard deviation of 36%. Suppose an analyst studies 20 stocks and finds that one-half have an alpha of 3.2%, and one-half have an alpha of -3.2%. The analyst then buys $1.6 million of an equally weighted portfolio of the positive-alpha stocks and sells short $1.6 million of an equally weighted portfolio of the negative-alpha stocks. a. What is the expected return (in dollars), and what is the standard deviation of the analyst's profit? (Enter your answers in dollars not in millions. Do not round intermediate calculations. Round your answers to the nearest dollar amount.) Expected return Standard deviation b-1. How does your answer for standard deviation change if the analyst examines 50 stocks instead of 20? (Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to the nearest dollar amount.) Standard deviation b-2. How does your answer for standard deviation change if the analyst examines 100 stocks instead of 20? (Enter your answer in dollars not in millions.) Standard deviationStep by Step Solution
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