Answer:
1.15
Explanation:
If investment is made in equal proportions, it means that;
weight in risk free ; wRF = 33.33% or 0.3333
Let the stocks be A and B
weight in stock A ; wA = 33.33% or 0.3333
weight in stock B; wB = 33.33% or 0.3333
Beta of A; bA = 1.85
Let the beta of the other stock be represented by "bB"
Beta of risk free; bRF = 0
Beta of portfolio = 1 since it is mentioned that "the total portfolio is equally as risky as the market "
The weight of portfolio is equal to the sum of the weighted average beta of the three assets. The formula is as follows;
wP = wAbA + wBbB + wRF bRF
1 = (0.3333 * 1.85) + (0.3333*bB) + (0.3333 *0)
1 = 0.6166 +0.3333bB + 0
1 - 0.6166 = 0.3333bB
0.3834 = 0.3333bB
Next, divide both sides by 0.3333 to solve for bB;
bB = 0.3834/0.3333
w=bB = 1.15
Therefore, the beta for the other stock would be 1.15
Answer:
The answer is D - No,Yes, No
Explanation:
The payback period is the time it will take the company to recover the initial investment given the estimated cash-flows over the life of the project. This payback period can be calculate even when the company does not yet know the required rate of return to use in its capital budgeting.
Net Present value is the sum of the discounted cash-flows over the life of the project, including the initial outlay. In order to calculate the discounted cash-flows, the required rate of return must be known, and therefore without it, the net present value of the project cannot be calculated.
The internal rate of return is the rate that equates the sum of the discounted cash-flows to zero. In other words, irrespective of what the required rate of return is, one can calculate this rate that would result in a net present value of zero from the given initial outlay and cash-flows expected over the life of the project.
Answer:
Your risk tolerance will change as your investment goals, financial situation and life experience evolve. Generally, the longer the length of time until you need your money, the more risk you can afford to take. In order to make the best investment, consider where you are in life.
Explanation:
Answer:
consumers are now willing to purchase more of this product at each possible price.
Explanation:
When the demand for a good or service increases, it means that consumers are buying more. In this case, according to the law of supply and demand, increasing demand will decrease inventories of good and will make it scarcer, increasing the price.
