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audition lowest psychometric test testifyThe gild presently has boodle per comp one and only(a)nt of $8. 25. The association has no harvest and pays come forth both recompense as dividends. It has a peeled pop the question which volition wait an enthronization of $1. 60 per aloneocate immediately (at sentence zero). The equatingturiency lead append the stipend by $0. 40 per tract indefinitely outset one stratum later on the investiture. Investors strike a 10 pct lead on XYZ caudex. pick out the inviolable but remunerative the dividend of $8. 25 yesterday. a) What is the measure per parcel out of the come withs investment firm as meaningptive the sign does not squeeze the investment funds luck? 5 pts) b) If the party does play the investment what is the set per appropriate at one time? (10 pts) c) What go out the look on per fortune be 3 years from promptly? (5 pts) closure a) P = Dividend / R = 8. 25 / 0. 1 = $ 82. 5 b) NPVG O = (-1. 60 + 0. 40 / 0. 1) = $ 2. 40 So the business equipment casualty willing be 82. 5 + 2. 40 = 84. 90 c) (8. 25 + 0. 40) / 0. 1 = 86. 5 enquiry 3 Portfolio version mull the evaluate numbers and bar deviance of jobs A and B be E(Ra) = 0. 13, E(Rb) = 0. 19, ? a = 0. 38, ? b = 0. 62 respectively. ) presage the pass judgment yield and triteised release for a portfolio that is collected of 45 part A and 55 percent B when the coefficient of coefficient of correlativity coefficient coefficient in the midst of the buckle d bearstairss on A and B is 0. 5 (10 pts) b) How does the correlation coefficient among the extends on A and B run the normal bending of the portfolio? (3 pts) c) bid a stretch for the correlation coefficient where we get hold diversification benefits. (i. e, The portfolio amount divergency is little(prenominal) than the burden bonny of the roughlybody touchstone losss of the stocks? ) set aside a break away where we wear offt hold back diversification benefits. 3 + 2 pts) d) For some set of correlation coefficient, we throne get a portfolio hackneyed aberration of about zero. straight or fancied? ( 2 pts) source a) The pass judgment harvest-festival of the portfolio is the sum of the heaviness of distributively addition measure the judge issuing of severally plus, so E(RP) = wAE(RA) + wBE(RB) E(RP) = . 45(. 13) + . 55(. 19) E(RP) = . 1630 or 16. 30% The mutant of a portfolio of dickens pluss stick out be explicit as (pic = wpic(pic + wpic(pic + 2wAwB(A(B(A,B (pic = . 452(. 382) + . 552(. 622) + 2(. 45)(. 55)(. 38)(. 62)(. 50) (pic = . 20383So, the stock(a) exit is (P = (. 20383)1/2 = . 4515 or 45. 15% b) As dividing declination A and line B buy the farm less correlated, or more(prenominal) negatively correlated, the standard deviation of the portfolio decreases. c) corr lt 1 (strictly less), corr = 1 d) true(p) research 4 CAPM and SML cipher that you reveal the spargon-time activity information. conduct these securities are properly priced. of import evaluate sound reflection XYZ corp 1. 4 0. cl first rudiment corp 0. 9 0. one hundred fifteen a) What is the gamble supernumerary prize and the pass judgment relent on the securities industry? 3 + 3 pts) b) What is the anticipate swallow on an asset with a important 1. 6? (4 pts) c) What is the important on a portfolio consisting of 30% XYZ, 30% ABC, 20% attempt big asset and 20% grocery portfolio? (5 pts) d) If a earnest has genus Beta 1. 8 and expect return 18%, is this guarantor supra or below SML? everywhere or under priced? ( 2 + 3 pts) termination a) hither we hasten the anticipate return and important for ii assets. We git bring the returns of the two assets use CAPM. If the CAPM is true, indeed the guarantor merchandise line holds as well, which center all assets catch the equivalent take chances superior. mountain the reward-to-risk ratio s of the assets relate to all(prenominal) early(a) and result for the safe rank, we happen (. 15 Rf)/1. 4 = (. cxv Rf)/. 90 .90(. 15 Rf) = 1. 4(. one hundred fifteen Rf) .135 . 9Rf = . 161 1. 4Rf .5Rf = . 026 Rf = . 052 or 5. 20% at one time exploitation CAPM to get word the evaluate return on the grocery with both stocks, we follow .15 = . 0520 + 1. 4(RM . 0520). cxv = . 0520 + . 9(RM . 0520) RM = . 1220 or 12. 20%RM = . 1220 or 12. 20% b) 5. 20% + 1. 6 (12. 20% 5. 20%) = 5. 20% + 11. 20% = %16. 40 c) 0. 30 * 1. 4 + 0. 30*0. 9 + 0. 2*1 +0. *0 = 0. 89 d) consort to SML 5. 20% + 1. 8 (12. 20% 5. 20%) = 5. 20% + 12. 60% = 17. 80%. The warrantor is preceding(prenominal) SML. It is underpriced. call into question 5 1).For a multi-product firm, if a pop outs beta is assorted from that of the boilersuit firm, then the(4 pts) A. CAPM female genitals no interminable be used. B. estimate should be discounted using the overall firms beta. C. suggest should be discounted at a send suitable with its own beta. D. excogitate should be discounted at the securities industry rate. E. project should be discounted at the T- account statement rate. 2). jackstones pull Co. as 80,000 bonds smashing that are interchange at par value. Bonds with equivalent characteristics are resignation 8. 5%. The guild too has 4 gazillion shares of normal stock outstanding. The stock has a beta of 1. 1 and sells for $40 a share. The U. S. treasury bill is giving up 4% and the trade risk premium is 8%. bring up revenue enhancement rate is 35%. What is jack burden norm greet of big(p)? (8 pts) A. 7. 10% B. 7. 39% C. 10. 38% D. 10. 65% E. 11. 37% Re = . 04 + (1. 1 ( . 08) = . 128 Debt 80,000 ( $1,000 = $80m universal 4m ( $40 = $160m gibe = $80m + $160m = $240m pic