Question
20 marks) Consider the following information: Rate of Return if State Occurs State ofEconomy Probability of State ofEconomy Stock A Stock B Stock C Boom
20 marks)
- Consider the following information:
|
|
| Rate of Return if State Occurs | ||||||||||
| State ofEconomy | Probability of State ofEconomy | Stock A | Stock B | Stock C | ||||||||
| Boom |
| .10 |
|
| .35 |
|
| .45 |
|
| .27 |
|
| Good |
| .60 |
|
| .16 |
|
| .10 |
|
| .08 |
|
| Poor |
| .25 |
|
| .01 |
|
| .06 |
|
| .04 |
|
| Bust |
| .05 |
|
| .12 |
|
| .20 |
|
| .09 |
|
|
| ||||||||||||
Your portfolio is invested 35% each in A and C, and 30% in B.
- What is the expected return of the portfolio?
- What is the variance of this portfolio?
- What is the standard deviation?
- Hawaii Corporation. is trying to determine its cost of debt. The firm has a debt issue outstanding with 23 years to maturity that is quoted at 97% of face value. The issue makes semiannual payments and has an embedded cost of 5% annually. Assume the par value of the bond is $1,000.
- What is the companys pre-tax cost of debt?
- If the tax rate is 40%, what is the after-tax cost of debt?
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Authors: Braun Schweiger
1st Edition
1493700391, 978-1493700394
