You are constructing a portfolio for an investor with a risk aversion of A=10. You can invest their money in a riskless asset with a return of 0.015, or a risky asset with an expected return of 0.097 and a standard deviation of 0.06. What proportion of their assets should you put in the risky asset?

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 4.5%. The probability distributions of the risky funds are:

The correlation between the fund returns is 0.0517.

What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Round your answer to 4 decimal places.)

SHARPE RATIO:

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 3.0%. The probability distributions of the risky funds are:   

The correlation between the fund returns is .0667.

Suppose now that your portfolio must yield an expected return of 9% and be efficient, that is, on the best feasible CAL.

a. What is the standard deviation of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b-1. What is the proportion invested in the T-bill fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b-2. What is the proportion invested in each of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

According to the buyer resolution theory, a purchase is made only after the client has made five buying decisions.

What are they and how does this help the salesperson to assist the client?

Successful salespeople have also adopted a product strategy that involves the discovery of buying motives that influence the purchase decision. Distinguish between the emotional and rational buying motives of a client.

Please discuss these items in detail

The market price of a stock is $24.66 and it just paid a dividend of $1.82. The required rate of return is 11.24%. What is the expected growth rate of the dividend?

You own $3,300 worth of stock in a company that is expected to pay dividend of $12 per share in 1 year and a liquidating dividend of $45 per share in 2 years. The required return on stock is 20%. Your preference is to receive equal dividends in each of the next 2 years. Show how you would accomplish this by creating homemade dividends.

Calculation of individual costs and WACC   Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following​ weights: 30​% ​long-term debt, 10​% preferred​ stock, and 60​% common stock equity​ (retained earnings, new common​ stock, or​ both). The​ firm's tax rate is 26​%.

Debt The firm can sell for ​$1030 a 20​-year, ​$1,000 ​-par-value bond paying annual interest at a 7.00​% coupon rate. A flotation cost of 2.52% of the par value is required.

Preferred stock 10.00​% ​(annual dividend) preferred stock having a par value of ​$100 can be sold for ​$96 . An additional fee of ​$2 per share must be paid to the underwriters.

Common stock  The​ firm's common stock is currently selling for ​$90 er share. The stock has paid a dividend that has gradually increased for many​ years, rising from ​$2.25 ten years ago to the ​$3.67 dividend​ payment D0​, that the company just recently made. If the company wants to issue new new common​ stock, it will sell them ​$2.00 below the current market price to attract​ investors, and the company will pay ​$3.50 per share in flotation costs.  

a.  Calculate the​ after-tax cost of debt.

b.  Calculate the cost of preferred stock.

c.  Calculate the cost of common stock​ (both retained earnings and new common​ stock).

d.  Calculate the WACC for Dillon Labs.

Determine the before and after-tax return from each of the following trades. Assume a

marginal tax rate of 40%.

a. You purchase a bond today that has a quoted price of 94.455/94.695, a fixed coupon

rate of 6% (paid quarterly) which last paid a coupon 40 days prior. You sell the

bond in exactly one year for a quoted price of 97.565/97.950.

b. You purchased a newly issued bond one year ago. At the time of issuance, the bond

was sold by the company for par, had a coupon rate of 5.5% (paid semi-annually)

and 10 years to maturity. The YTM on the bond today is 6.25% and you sell it.

the main services that financial institutions provide as financial intermediaries

You are called in as a financial analyst to appraise the bonds of Olsen’s Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 12 percent, which is paid semiannually. The yield to maturity on the bonds is 12 percent annual interest. There are 10 years to maturity. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.

a. Compute the price of the bonds based on semiannual analysis. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

BOND PRICE___________

b. With 5 years to maturity, if yield to maturity goes down substantially to 6 percent, what will be the new price of the bonds? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

NEW BOND PRICE________________

***Please show your math work, thank you!

Assume that stock market returns have the market index as a common factor, and that all stocks in the economy have a beta of 2.0 on the market index. Firm-specific returns all have a standard deviation of 32%.

Suppose that an analyst studies 20 stocks and finds that one-half of them have an alpha of +3.0%, and the other half have an alpha of −3.0%. Suppose the analyst invests $1.0 million in an equally weighted portfolio of the positive alpha stocks, and shorts $1 million of an equally weighted portfolio of the negative alpha stocks.

a. What is the expected profit (in dollars) and standard deviation of the analyst’s profit? (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

b. How does your answer change if the analyst examines 50 stocks instead of 20 stocks? 100 stocks? (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

Market Value Capital Structure

Suppose the Schoof Company has this book value balance sheet:

The notes payable are to banks, and the interest rate on this debt is 11%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of the company's permanent capital structure. The long-term debt consists of 30,000 bonds, each with a par value of $1,000, an annual coupon interest rate of 7%, and a 25-year maturity. The going rate of interest on new long-term debt, r_d, is 10%, and this is the present yield to maturity on the bonds. The common stock sells at a price of $50 per share. Calculate the firm's market value capital structure. Do not round intermediate calculations. Round your answers to two decimal places.

West Fraser Timber Company (WFT) is expected to have free cash flow in the coming year of $2 million and its free cash flow is expected maintain at a sustainable growth rate of 4% per year. It has a debt worth $10 million. It’s equity cost of capital is 12%, cost of debt before tax is 6%, and it pays a corporate tax rate of 30%. If WFT Company maintains a debt-equity ratio of 0.5 and the company has 3 million common shares outstanding, what is the fair value of WFT stock?

Consider an asset that costs $475,200 and is depreciated straight-line to zero over its 8-year tax life. The asset is to be used in a 5-year project; at the end of the project, the asset can be sold for $59,400.

Required : If the relevant tax rate is 31 percent, what is the aftertax cash flow from the sale of this asset?