you have decided to sublet your apartment. your tenant has agreed to pay $150 per month starting today (with payments made at th
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Answer:
Answer is explained in the explanation section.
Explanation:
Note: First of all, this question is incomplete and lacks necessary data to calculate this question. However, I have found the similar question on the internet with complete data given. Additionally, I have shared that data as well in the attachment below for your convenience, Thanks.
Solution:
SD = Standard Deviation
Using utility function, E(R) = Rp - 0.005 x A x = 1.34 - 0.005 x 3x
Using utility function, E(R) = 1.093%
If the weight in the risky portfolio is let's say, "a" then,
weight in the risk-free asset = 1 - a
So,
E(R) = a x Rp + (1 - a) x Rf
1.093% = a x 1.34% + (1 - a) x 0.50%
Solving for "a"
a = 70.56% - weight in risky portfolio
and 1 - a = 29.44% - weight in risk-free asset.
Similarly, if you want a return of 1.10%,
we can follow the above steps and get
1.1% = a x 1.34% + (1 - a) x 0.5%
Weight in risky portfolio,
a = 71.43%
weight in risk-free asset,
1 - a = 28.57%
Answer:
It should obtain at least: $ 17,363,986.04
Explanation:
we have several cash flow of different magnitude. As thisi s a finite sum of cash flow, we solve using present value of each lump sum using our WACC as discount rate:
Year Nominal Cash Flow Present Value
1 8,500,000.00 7,391,304.35
2 7,000,000.00 5,293,005.67
3 5,000,000.00 3,287,581.16
4 2,000,000.00 1,143,506.49
5 500,000.00 248,588.37
Total Present value 17,363,986.04