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Citrus2011 [14]
3 years ago
8

Based on the balance

Business
1 answer:
stich3 [128]3 years ago
3 0

Answer:

im confused what is ur question?

Explanation:

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Suppose that the S&P 500, with a beta of 1.0, has an expected return of 13% and T-bills provide a risk-free return of 4%. a.
Aleksandr [31]

Answer:

a. The answers are as follows:

(i) Expected of Return of Portfolio = 4%; and Beta of Portfolio = 0

(ii) Expected of Return of Portfolio = 6.25%; and Beta of Portfolio = 0.25

(iii) Expected of Return of Portfolio = 8.50%; and Beta of Portfolio = 0.50

(iv) Expected of Return of Portfolio = 10.75%; and Beta of Portfolio = 0.75

(v) Expected of Return of Portfolio = 13%; and Beta of Portfolio = 1.0

b. Change in expected return = 9% increase

Explanation:

Note: This question is not complete as part b of it is omitted. The complete question is therefore provided before answering the question as follows:

Suppose that the S&P 500, with a beta of 1.0, has an expected return of 13% and T-bills provide a risk-free return of 4%.

a. What would be the expected return and beta of portfolios constructed from these two assets with weights in the S&P 500 of (i) 0; (ii) 0.25; (iii) 0.50; (iv) 0.75; (v) 1.0

b. How does expected return vary with beta? (Do not round intermediate calculations.)

The explanation to the answers are now provided as follows:

a. What would be the expected return and beta of portfolios constructed from these two assets with weights in the S&P 500 of (i) 0; (ii) 0.25; (iii) 0.50; (iv) 0.75; (v) 1.0

To calculate these, we use the following formula:

Expected of Return of Portfolio = (WS&P * RS&P) + (WT * RT) ………… (1)

Beta of Portfolio = (WS&P * BS&P) + (WT * BT) ………………..………………. (2)

Where;

WS&P = Weight of S&P = (1) – (1v)

RS&P = Return of S&P = 13%, or 0.13

WT = Weight of T-bills = 1 – WS&P

RT = Return of T-bills = 4%, or 0.04

BS&P = 1.0

BT = 0

After substituting the values into equation (1) & (2), we therefore have:

(i) Expected return and beta of portfolios with weights in the S&P 500 of 0 (i.e. WS&P = 0)

Using equation (1), we have:

Expected of Return of Portfolio = (0 * 0.13) + ((1 - 0) * 0.04) = 0.04, or 4%

Using equation (2), we have:

Beta of Portfolio = (0 * 1.0) + ((1 - 0) * 0) = 0

(ii) Expected return and beta of portfolios with weights in the S&P 500 of 0.25 (i.e. WS&P = 0.25)

Using equation (1), we have:

Expected of Return of Portfolio = (0.25 * 0.13) + ((1 - 0.25) * 0.04) = 0.0625, or 6.25%

Using equation (2), we have:

Beta of Portfolio = (0.25 * 1.0) + ((1 - 0.25) * 0) = 0.25

(iii) Expected return and beta of portfolios with weights in the S&P 500 of 0.50 (i.e. WS&P = 0.50)

Using equation (1), we have:

Expected of Return of Portfolio = (0.50 * 0.13) + ((1 - 0.50) * 0.04) = 0.0850, or 8.50%

Using equation (2), we have:

Beta of Portfolio = (0.50 * 1.0) + ((1 - 0.50) * 0) = 0.50

(iv) Expected return and beta of portfolios with weights in the S&P 500 of 0.75 (i.e. WS&P = 0.75)

Using equation (1), we have:

Expected of Return of Portfolio = (0.75 * 0.13) + ((1 - 0.75) * 0.04) = 0.1075, or 10.75%

Using equation (2), we have:

Beta of Portfolio = (0.75 * 1.0) + ((1 - 0.75) * 0) = 0.75

(v) Expected return and beta of portfolios with weights in the S&P 500 of 1.0 (i.e. WS&P = 1.0)

Using equation (1), we have:

Expected of Return of Portfolio = (1.0 * 0.13) + ((1 – 1.0) * 0.04) = 0.13, or 13%

Using equation (2), we have:

Beta of Portfolio = (1.0 * 1.0) + (1 – 1.0) * 0) = 1.0

b. How does expected return vary with beta? (Do not round intermediate calculations.)

There expected return will increase by the percentage of the difference between Expected Return and Risk free rate. That is;

Change in expected return = Expected Return - Risk free rate = 13% - 4% = 9% increase

4 0
3 years ago
Because customers participate directly in the service process, the success of technological innovation is dependent upon:
miss Akunina [59]
<span>Because customers often participate directly when it comes to the service process, the success of any technological innovation is highly dependent on customer acceptance. This means that if the customers don't like the product or something about it, a technological innovation will not find a place in the main stream and will be unable to succeed.</span>
5 0
3 years ago
Consider the following information: Rate of Return If State OccursState ofProbability ofEconomyState of EconomyStock AStock BSto
grigory [225]

Answer:

Expected Return Boom = 0.29(0.353) + 0.42(0.453) + 0.29(0.333)

Expected Return Boom = 0.3892

Expected Return Boom = 38.92%

Expected Return Good=  0.29(0.123) + 0.42(0.103) + 0.29(0.173)

Expected Return Good = 0.1291

Expected Return Good = 12.91%

Expected Return Poor = 0.29(0.013) + 0.42(0.023) + 0.29(-0.053)

Expected Return Poor = - 0.00194

Expected Return Poor = - 0.194%

Expected Return Bust = 0.29(-0.113) + 0.42(-0.253) + 0.29(-0.093)

Expected Return Bust= - 0.166

Expected Return Bust= - 16.6%

a. Expected return portfolio = 0.3892*0.18 + 0.1291*0.42 + 0.32*- 0.00194 + 0.08*- 0.166

Expected return portfolio = 0.1104

Expected return portfolio = 11.04%

b. Variance = 0.18*(0.3892-0.1104)^2 + 0.42*(0.1291-0.1104)^2 + 0.32*(- 0.00194-0.1104)^2 + 0.08*(- 0.166-0.1104)^2

Variance = 0.02429

c. Standard Deviation = (0.02429)^(0.5)

Standard Deviation = 0.1558

Standard Deviation = 15.58%

3 0
3 years ago
Which country has a Gross Domestic Product of about 8.5 trillion dollars?
horsena [70]
The answer would be : B. China

Japan has a  4.92 trillion Dollars of Gross Domestic Products
United states has a 16.77 trillion dollars worth of Gross Domestic Products
and
Russia has a 2.097 trillion dollars of Gross Domestic Products

That leave China as the correct answer
8 0
3 years ago
During its first year of operations, Silverman Company paid $14,000 for direct materials and $19,000 for production workers' wag
hjlf

Answer:

GROSS MARGIN = 33.33%

Explanation:

PRODUCTION COST COMPONENTS

  • Direct materials 14,000  
  • Direct work 19,000  
  • Lease and utilities 17,000

TOTAL PRODUCTION COST = 50,000

TOTAL UNITS PRODUCED = 5,000

UNIT COST= (Total Production Cost / Total Units Produced) = 50,000 / 5,000 = 10  

FINAL GOODS INVENTORY = (Total Units Produced – Total Units Sales) = 5,000 – 3,000 = 2,000

FINAL GOODS INVENTORY AMOUNT = (Final goods Inventory * Unit Cost) = 2,000 * 10 = 20,000

SALES REVENUE= (Sold Units * Sale Price) = (3,000 * 15) = 45,000

COST OF SOLD GOODS (a) = (Sold Units * Unit Cost) = 3,000 * 10 = 30,000

COST OF SOLD GOODS (b) = (Beginning Balance + Production cost – Final Balance) = 0 + 50,000 – 20,000 = 30,000

GROSS MARGIN = ((Sales Revenue – Cost of sold Goods) / Sales Revenues) * 100 = ((45,000 – 30,000) / 45,000) * 100 = 33.33%

COST OF SOLD GOODS (a) Calculated according to the inventory unit cost

COST OF SOLD GOODS (b) Calculated as the difference in inventory

7 0
3 years ago
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