1. Tom has $300,000 to invest. He invests his money into four stocks with the following...

1. Tom has $300,000 to invest. He invests his money into four stocks with the following betas:

Stock A= $120,000 Beta: 2.15

Stock B= $75,000 Beta: 0.40

Stock C= $50,000 Beta: 0.85

Stock D= $55,000 Beta: 0.66

The risk-free rate is 4%, and the expected market return is 9% Compute the required rate of return on the portfolio.

Expert Solution

Ans 10.11%

Stock	INVESTMENT (i)	Beta (ii)	Investment* Beta (i)* (ii)
A	1,20,000	2.15	2,58,000.00
B	75,000	0.40	30,000.00
C	50,000	0.85	42,500.00
D	55,000	0.66	36,300.00
Total	3,00,000		3,66,800.00


AVERAGE BETA =	(INVESTMENT * BETA) / TOTAL INVESMENT
	366800 / 300000
	1.222666667

Expected Return =	Risk free Return + (Market Return - Risk free return)* Beta
Expected Return =	4% + (9% - 4%) *1.222666667
Expected Return =	10.11%

jeff jeffy answered 5 months ago

EX2. Selena invests the following sums of money in common stocks of money in common stocks...

EX2. Selena invests the following sums of money in common stocks of money in common stocks having expected returns as follow: Common stock $ Amount invested Expected return A 6,000 0.14 B 11,000 0.16 C 9,000 0.17 D 7,000 0.13 E 5,000 0.20 F 13,000 0.15 G 9,000 0.18 What is the expected return on her portfolio?

1. Tom has recently inherited $600,000.00 from his late mother. He intends to use the money...

1. Tom has recently inherited $600,000.00 from his late mother. He intends to use the money to purchase an empty warehouse in his suburb and use the remaining money to commence an import / export from this premises. He intends to hire at least 25 staff in the first month of commencing operations. He has come to you for advice regarding which business structure would best suit his planned venture and would like to know what initial and ongoing compliance...

Scott has $40,000 of his own money to invest. He approached his bank for a margin...

Scott has $40,000 of his own money to invest. He approached his bank for a margin loan to add to his money. He intends on purchasing Australian shares. The bank’s loan-to-value ratio (LVR) is 70%. Scott borrows $110,000. After six months, Scott’s portfolio value has dropped from $150,000 to $100,000. a. Calculate the LVR using the reduced portfolio value. 110,000/100,000 b. Assume the bank issues a margin call. Suggest at least two different ways that he could return his portfolio...

1. George and Sarah each invest $1,500 today. George is more conservative and invests his money...

1. George and Sarah each invest $1,500 today. George is more conservative and invests his money in an account that is expected to earn 5% a year. Sarah is an aggressive investor and invests her money in an account that is expected to earn 18% a year. Assume George and Sarah each earns their expected rates of return. After 100 months, how much more money will Sarah have than George?

A woman has a total of $14,000 to invest. She invests part of the money in...

A woman has a total of $14,000 to invest. She invests part of the money in an account that pays 11% per year and the rest in an account that pays 12% per year. If the interest earned in the first year is $1630, how much did she invest in each account?

Eric Poppovich invests money in two stocks for the upcoming year. His investment is shown below:...

Eric Poppovich invests money in two stocks for the upcoming year. His investment is shown below: STOCK: # of shares Price Per Share Expected Return Standard Deviation LBJ Corporation (A) 49.00 $38.43 5.00% 18.00% Duncan Inc. (B) 20.00 $50.74 10.00% 21.00% The correlation between LBJ and Duncan is 0.50. What is the expected return for the portfolio in the coming year? What is the standard deviation of the portfolio? Answer Format: Percentage Round to: 2 decimal places (Example: 9.24%, %...

Tom wishes to purchase a property that has been valued at $300,000. He has 25% of...

Tom wishes to purchase a property that has been valued at $300,000. He has 25% of this amount available as a cash deposit, and will require a mortgage for the remaining amount. The bank offers him a 25-year mortgage at 2% interest. Calculate his monthly repayments. Give your answer in dollars and cents.

Parker has $10,000 to invest. He wants to put his money in a one-year investment earning...

Parker has $10,000 to invest. He wants to put his money in a one-year investment earning an annual interest rate of 12%. Parker is in a 42% tax bracket. Required: a) Calculate the total value of Parker's investment, after-tax, at the end of the year. b) Calculate the amount of tax Parker will pay on his investment.

Mr. Thomas has just inherited $ 1000,000. He could either invest his money in the bank...

Mr. Thomas has just inherited $ 1000,000. He could either invest his money in the bank which gives a return of 4% or invest in shares of Monopoly Corp which is the only company in the market. Shares of Monopoly Corp offer an average return of 12% and a risk of 10%. a) If Mr. Thomas wants a return of 10%, how much money does he need to invest in shares ? b) Calculate the risk of his investment strategy.

Ed Moura has $88000 invested in stocks paying 8%. How much additional money should he invest...

Ed Moura has $88000 invested in stocks paying 8%. How much additional money should he invest in certificates of deposit paying 3% so that the average return on the two investments is 4%?

Question