Pl

Answers are provided. Please explain each step necessary to reach the given answers.

1) A portfolio consists of a Treasury bill with a face amount of $20,000 and 300 shares of Portland Corp. stock priced at $70 a share. The expected return on the stock is 12%, with sigma of 38%. The T-bill matures after one year, and its yield is 2.9%. Find E(Rp) and s (Rp) of the portfolio. 7.626%, 19.73%

2) You have bought 400 shares of Bangor Company at $25 per share and 600 shares of Lewiston Corporation stock at $16 per share. The s(R) of Lewiston is 0.35 and that of Bangor is 0.45. You have calculated the s (Rp) of this portfolio to be 0.37. What is the correlation coeffiecient between Lewiston and Bangor? 69.62%

3) You invest $29,000 in Augusta which has E(R) = 12% and s(R) = 40% and $21,000 in Auburn stock which has E(R) = 15% and s(R) = 45%. The correlation coefficient between them is .35. Calculate the expected return and sigma of the portfolio in percentage and in dollars. 13.26%, 34.68% and $6,630, $17,338

4) A portfolio consists of 200 shares of Bath Corporation, worth $80 each and 34 bonds of Bangor, selling at par with coupon at 5%. The sigma of the bonds is 4%, and that of the stock 42%. The expected return of the stock is 14%. The correlation coefficient between the two companies is 0.65. Find the value of E (Rp) and s (Rp). 7.88%, 15.35%

5) Belfast Company has B = 1.25, growth rate of 4.5%, and a dividend next year of $1.25. Belfast stock sells at $11 a share and the riskless rate is 9%. Find the expected return on the market. 14.49%

6) Brewer Corporation stock is selling for $60 a share today. It will pay a dividend of $3 next year and its total return should be 12%. Well-informed economists expect the return on the market to be 10% and the riskless rate is 6.5%. Find the beta and the expected price of a share of Brewer stock next year. B = 1.57, $64.20

7) Calais Company stock sells for $25 a share. It has a growth rate of 8%, and its dividend next year will be $1.25. If the expected return on the market is 12% and the riskless rate is 8%, find the B of Calais. B = 1.25

8) Caribou Corp. has B = 1.24 and a growth rate of 4%. It just paid its annual dividend of $4 and a riskless rate is 6%. If the expected return on the market is 13%, find the price of a share of stock. $38.95