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ANSWER ALL THE QUESTIONS PLS 1. 2. 12 The investor invested in stocks and bonds to form a minimum variance portfolio. The return and standard
ANSWER ALL THE QUESTIONS PLS
1.
2. 12
The investor invested in stocks and bonds to form a minimum variance portfolio. The return and standard deviation is as follows: Stock Bond Expected return 14% 8% Standard deviation 40% 30% The correlation between returns of the stock and bond is 0.06. Calculate the minimum variance portfolio's expected return. (A) The expected return of the minimum variance portfolio is 11.00%. (B) The expected return of the minimum variance portfolio is 14.28%. (C) The expected return of the minimum variance portfolio is 8.36%. (D) The expected return of the minimum variance portfolio is 10.11%. The DENC Corporation has the unlevered cost equity of 10%. The company wants to expand its operation by issuing new debt. If the cost of debt for the company is 6% and the corporate tax rate is 30%. What must be the debt-equity ratio of the company if the targeted cost of equity is 12%? Calculate the debt-equity (D/E) ratio. (A) The debt-equity (D/E) ratio is 0.50 (B) The debt-equity (D/E) ratio is 0.60 (C) The debt-equity (D/E) ratio is 2.80 (D) The debt-equity (D/E) ratio is 0.71 The company is considering two projects. The initial investment in the Project A and B are $50,000 and $60,000 respectively. The Project A will generate annual cash flows of $26,000 for four years and the Project B will generate annual cash flows of $30,000 for four years. What must be the required rate of return, so that the company will be indifferent between these two projects? (A)The required rate of return must be 21.86%. (B) The required rate of return must be 37.42%. (C) The required rate of return must be 34.90%. (D) The required rate of return must be 31.39%
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