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answers are in bold, i need step by step explanation please, thanks. 1. 2. 3. 4. Consider the following two projects: Year 0 Cash Project
answers are in bold, i need step by step explanation please, thanks.
Consider the following two projects: Year 0 Cash Project Flow A -100 B -73 Year 1 Cash Flow 40 30 Year 2 Cash Flow 50 30 Year 3 Cash Flow 60 30 Year 4 Cash Flow N/A N/ 30 Discount Rate .15 .15 The incremental IRR of Project B over Project A is closest to: a. 12.6% b. 23.3% c. 1.7% d. 17.3% e. None of the above, no IRR exists. Consider an equally weighted portfolio that contains 10 stocks. If the average standard deviation of these stocks is 0.25 and the average correlation between the stocks is 0.4, then the standard deviation of this equally weighted portfolio is closest to: a. 0.23 b. 0.14 c. 0.17 d. 0.63 e. None of the above Consider the following covariances between securities: Duke Microsoft Wal-Mart Duke 0.0568 -0.0193 0.0037 Microsoft-0.0193 0.2420 0.1277 Wal-Mart 0.0037 0.1277 0.1413 The variance on a portfolio that is made up of a $6,000 investment in Duke Energy stock and a $4,000 investment in Wal-Mart stock is closest to: a. 0.050 b. 0.045 c. 0.053 d. -0.020 e. None of the above Tom's portfolio consists solely of an investment in Merck stock. Merck has an expected return of 13% and a standard deviation of 25%. The market portfolio has an expected return of 12% and a standard deviation of 18%. The risk-free rate is 4%. Assume that CAPM assumptions hold. If Tom wants to maintain the current standard deviation of 25%, then the expected return that Tom could achieve by investing in the market portfolio and risk-free investment is closest to: a. 13% b. 15% c. 12% d. 16% e. None of the above 1.
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