Question
In: Finance
Consider a world that only consists of the three stocks shown in the following table: LOADING......
Consider a world that only consists of the three stocks shown in the following table:
LOADING...
.
a. Calculate the total value of all shares outstanding currently.
b. What fraction of the total value outstanding does each stock make up?
c. You hold the market portfolio, that is, you have picked portfolio weights equal to the answer to part b with each stock's weight is equal to its contribution to the fraction of the total value of all stocks. What is the expected return of your portfolio?
Stock
Total Number
of Shares Outstanding
Current Price per Share
Expected Return
First Bank
101101 million
$8282
2020%
Fast Mover
5959 million
$132132
1313%
Funny Bone
190190 million
$3232
1414%
Solutions
Expert Solution
| First Bank | Fast Mover | Funny Bone | ||
| Shares outstanding | 101000000 | 59000000 | 190000000 | |
| Price per share | 82 | 132 | 32 | |
| Expected return | 20% | 13% | 14% | |
| a | Value of shares | 8282000000 | 7788000000 | 6080000000 |
| Total value | 22150000000 | |||
| b | Fraction | 0.3739 | 0.3516 | 0.2745 |
| c | Expected return | 15.89% |
WORKINGS
jeff jeffy answered 7 months agoRelated Solutions
Consider a world that only consists of the three stocks shown in the following table: LOADING.......
Consider a world that only consists of the three stocks shown in
the following table: LOADING.... a. Calculate the total value of
all shares outstanding currently. b. What fraction of the total
value outstanding does each stock make up? c. You hold the market
portfolio, that is, you have picked portfolio weights equal to the
answer to part b with each stock's weight is equal to its
contribution to the fraction of the total value of all stocks. What
is...
For the project shown in the following table, LOADING... , calculate the internal rate of return...
For the project shown in the following table,
LOADING...
,
calculate the internal rate of return
(IRR).
Then indicate, for the project, the maximum cost of capital
that the firm could have and still find the IRR acceptable.
Initial investment
(CF 0CF0)
$160 comma 000160,000
Copy to Clipboard
+
Open in Excel
+
Year
(t)
Cash inflows
(CF Subscript tCFt)
1
$45 comma 00045,000
2
$50 comma 00050,000
3
$45 comma 00045,000
4
$30 comma 00030,000
5
$35 comma 00035,000...
Consider the following stocks, LOADING... , all of which will pay a liquidating dividend one year...
Consider the following stocks, LOADING... , all of which will
pay a liquidating dividend one year from now and nothing in the
interim. Assume the risk-free rate is 4 % and the market risk
premium is 7 % a. What does the CAPM predict the expected return
for each stock should be? b. Clearly, the CAPM predictions are
not equal to the actual expected returns, so the CAPM does not
hold. You decide to investigate this further. To see what...
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
Consider the three stocks in the following table. Pt represents
price at time t, and Qt represents shares outstanding at time t.
Stock C splits two for one in the last period.
P0 Q0 P1 Q1 P2 Q2
A 90 100 95 100 95 100
B 50 200 45 200 45 200
C 100 200 110 200 55 400
a. Calculate the rate of return on a price-weighted index of the
three stocks for the first period ( t 5...
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two-for-one in the last
period.
P0
Q0
P1
Q1
P2
Q2
A
100
100
105
100
105
100
B
60
200
55
200
55
200
C
120
200
130
200
65
400
Calculate the first-period rates of return on the following indexes
of the three stocks: (Do not round intermediate
calculations. Round your answers to...
Consider the three stocks in the following table. Ptrepresents price at time t, and Qtrepresents shares...
Consider the three stocks in the following table.
Ptrepresents price at time t, and
Qtrepresents shares outstanding at time
t. There are three time points 0, 1, and 2.
P0
Q0
P1
Q1
P2
Q2
A
90
100
95
100
100
100
B
50
200
45
200
45
200
C
100
200
110
200
105
200
a) Form an equally weighted portfolio in stocks A, B, C at time 0
and hold it to time 1.
Calculate the portfolio return...
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
Consider the three stocks in the following table. Pt represents
price at time t, and Qt represents shares outstanding at time
t.
Po Q0
P1
Q1
A 87
100
92
100
B
47 200 42
200
C 94
200
104 200
What is the rate of return on the equal-weighted index of the
three stocks?
O 1.92%
O 10.64%
O. 4.07%
O 4.39%
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two-for-one in the last
period.
P0
Q0
P1
Q1
P2
Q2
A
80
100
85
100
85
100
B
40
200
35
200
35
200
C
80
200
90
200
45
400
Calculate the first-period rates of return on the following indexes
of the three stocks: (Do not round intermediate
calculations. Round your answers to...
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
Consider the three stocks in the following table.
Pt represents price at time t, and
Qt represents shares outstanding at time
t. Stock C splits two-for-one in the last
period.
P0
Q0
P1
Q1
P2
Q2
A
85
100
90
100
90
100
B
45
200
40
200
40
200
C
90
200
100
200
50
400
a. Calculate the rate of return on a
price-weighted index of the three stocks for the first period
(t = 0 to t...
Consider the three stocks in the following table. Pt represents price at time t, and Qt...
Consider the three stocks in the following table. Pt represents
price at time t, and Qt represents shares outstanding at time t.
Stock C splits two-for-one in the last period. P0 Q0 P1 Q1 P2 Q2 A
84 100 89 100 89 100 B 44 200 39 200 39 200 C 88 200 98 200 49 400
a. Calculate the rate of return on a price-weighted index of the
three stocks for the first period (t = 0 to t...
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