25

A portfolio has 15% of its value in IBM shares and the rest in Microsoft (MSFT). The volatility of IBM and MSFT are 40% and 30%, respectively, and the correlation between IBM and MSFT is 0.6. What is the standard deviation of the portfolio?

A.22.42%

B.24.66%

C.20.18%

D.21.3%

Time Warner shares have a market capitalization of $65 billion. The company just paid a dividend of $0.40 per share and each share trades for $25. The growth rate in dividends is expected to be 7.5% per year. Also, Time Warner has $10 billion of debt that trades with a yield to maturity of 8%. If the firm's tax rate is 25%,compute the WACC?

A.8.79%

B.8.35%.

C. 9.67%

D.10.11%