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Ivenika [448]
3 years ago
11

A portfolio has 30% of its value in IBM shares and the rest in Microsoft (MSFT). The volatility of IBM and MSFT are 35% and 30%,

respectively, and the correlation between IBM and MSFT is 0.5. What is the standard deviation of the portfolio
Business
1 answer:
Masteriza [31]3 years ago
5 0

Answer:

30.51%

Explanation:

The computation of the standard deviation is shown below:

Data provided in the question

Weightage in IBM = 30% = WI

Weightage in MFST = 100 - 30% = 70% = WM

The Volatility in IBM = 35% = VI

The Volatility in MFST = 30% = VM

Correlation = 0.5 = C

Based on the above information

The standard deviation is

= \sqrt{(VI^2\times WI^2) + (VM^2 \times WM^2) + (2 \times VI \times WI \times VM \times WM \times C)}

= \sqrt{(0.35^2\times 0.30^2) + (0.35^2 \times 0.70^2) + (2 \times 0.35 \times 0.30\times 0.30 \times 0.70 \times 0.5)}

= 30.51%

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A share of stock is now selling for $115. It will pay a dividend of $9 per share at the end of the year. Its beta is 1. What do
natali 33 [55]

Answer:

The expected price of the stock is $122.03

Explanation:

To calculate the expected price of the stock at the end of the year or at Year 1, we first need to determine the required rate of return on the stock. We will use the CAPM equation to calculate the required rate of return.

The required rate of return is calculated as,

r = rRF + Beta * (rM - rRF)

Where,

  • rRF is the risk free rate
  • rM is the return on market

r = 0.05 + 1 * (0.14 - 0.05)

r = 0.14

We already have the price of the stock today, the D1 and the required rate of return. Using the constant dividend growth model of DDM, we calculate the growth rate in dividends to be,

P0 = D1 / (r - g)

115 = 9 / (0.14 - g)

115 * (0.14 - g)  =  9

16.1 - 115g  =  9

16.1 - 9 = 115g

7.1 / 115 = g

g = 0.0617 or 6.17%

Using the same formula and replacing D1 with D2, we can calculate the price of the stock at the end of the year or at start of Year 1.

P1 = 9 * (1+0.0617)  /  (0.14 - 0.0617)

P1 = $122.03

4 0
3 years ago
. George worked 52 hours last week. In his job, any hour past 40 hours is considered overtime. His overtime pay is 1.5 times his
stiks02 [169]
Find how much time he worked overtime.
52-40=12
Find his overtime salary.
22.5*1.5=33.75
Calculate how much money he makes for 40 hours.
40*22.5=900
Calculate how much money he made in overtime.
33.75*12=405
Add both earnings together.
900+405=1305

George earned 1305$ last week.
3 0
3 years ago
Mark, Cal and Aidan have decided to form a business where all owners will share in operating the business and in assuming liabil
Llana [10]

The partnership most likely formed is a general partnership.

<h3>What is a general partnership?</h3>

A general partnership is when two or more people come together to form a business. The people who come together to create the business are referred to as partners.

In a general partnership, all the partners are responsible for the running the company. All the partners have an unlimited liability.

To learn more about partnerships, please check: brainly.com/question/9909227

4 0
2 years ago
Suppose a decrease in consumer confidence has caused aggregate demand to shift from AD to AD1.
Romashka-Z-Leto [24]

Based on the shift of aggregate demand from AD to AD1, the aggregate demand would have changed by -$30 Billion.

The expenditures multiplier based on the MPC is 5.

The investment needs to change by $6 billion.

To get to the required investment demand, the Fed needs to change rates from 10% to <u>7%</u> and would need to adjust the money supply by $20 billion increase.

<h3>What is the change in aggregate demand?</h3>

This can be found as:

= ADI - Real GDP at AD

= 90 - 120

= -$30 billion.

<h3>What is the expenditure multiplier?</h3>

This can be found as:

= 1 / ( 1 - MPC)

= 1 / (1 - 0.8)

= 5

<h3 /><h3>What should the investment change by?</h3>

Investment demand should change by:

= Shortfall in GDP / Multiplier

= 30 / 5

= $6 billion

<h3>What interest rate should the Fed implement to the investment level required?</h3>

Investment amount required:

= Current investment + Required investment

= 10 + 6

= $16 billion

Rate needs to become 7% according to graph.

<h3>How much should money supply be adjusted?</h3>

In order to get to the desired 7%, the money supply needs to increase to $50 billion. The adjustment is:

= New level - Current level

= 50 - 30

= $20 billion

Find out more on Money supply at brainly.com/question/3625390.

4 0
2 years ago
Geri is a minor. Without her parents’ knowledge, she signs a contract to buy an airline ticket to Hawaii for spring break. Geri’
brilliants [131]
<span>Geri is a minor. Without her parents' knowledge, she signs a contract to buy an airline ticket to Hawaii for spring break. Geri's parents are liable for no part of the price of the ticket. This is because minors lack the legal capacity to make a contract.</span>
8 0
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