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Fofino [41]
2 years ago
11

You have $100,000 available to invest. The risk-free rate, as well as your borrowing rate, is 4%. The risky portfolio has an exp

ected return of 10% and a return standard deviation of 20%. If you want the standard deviation of your investment to be 30%, you must _________.
Business
1 answer:
dlinn [17]2 years ago
5 0

Answer:

c. borrow $50,000 at the risk-free rate

Explanation:

Options are: "invest $100,000 in the risk-free asset, borrow $25,000 at the risk-free rate, borrow $50,000 at the risk-free rate, invest $125,000 in the risk-free asset"

Standard Deviation of the portfolio = Weight of Risky assets * Standard Deviation of risky assets

30% = Weight of Risky assets * 20%

Weight of Risky assets = 30% / 20%

Weight of Risky assets = 1.50

Weight of Risk Free Assets = 1 - 1.50

Weight of Risk Free Assets = -0.50

Borrow from risk assets = 0.50 * $100,000

Borrow from risk assets = $50,000

Hence, If we want the standard deviation of our investment to be 30%, we must borrow $50,000

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MAXImum [283]

Answer

The answer and procedures of the exercise are attached in the following archives.

Step-by-step explanation:

You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.  

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3 years ago
Mason works at a toy assembly plant and is responsible for the various departments that perform different functions. he helps pe
julia-pushkina [17]

Based on the scenario above, Mason is likely to be the general manager. It is because he helps people in different departments in regards of specific tasks in which a general manager would do, while Julio is considered to be a functional manager because he makes sure that everyone in his department has the skills and training in which a functional manager is responsible of.

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3 years ago
Amy earns an annual salary of $40,000 working for the law office of smith and jones. calculate her gross pay per paycheck if she
Aloiza [94]
1,666 divide it by 12 then divide it by 2
3 0
3 years ago
Tina's Track Supply's market-to-book ratio is currently 4.5 times and PE ratio is 10.5 times. If Tina's Track Supply's common st
otez555 [7]

Answer:

$22.2222, $9.5238, respectively

Explanation:

The market-to-book ratio is given by a share's market value divided by its book value, if shares are selling for $100 on the market, the book value is:

B = \frac{\$100}{4.5}=\$22.2222

The price to earnings ratio (PE ratio) is determined as a share's price divided by the earnings per share. Earnings per share are:

E=\frac{\$100}{10.5}\\E=\$9.5238

The book value per share and earnings per share are $22.2222, $9.5238, respectively

5 0
3 years ago
. El Capitan Foods has a capital structure of 36% debt and 64% equity, its tax rate is 35%, and its beta (leveraged) is 1.4. Bas
almond37 [142]

Answer:

The firm's unleveraged beta is 1.0251

Explanation:

Hamada's equation  is used to separate the financial risk of a levered firm from its business risk.

The Hamada equation:

Bu= Bl/(1 + (1 − T)(D/E))

Bl = 1.4

wd = 0.36

Tax rate = 35%

D/E = wd / (1 – wd) = 0.5625 = 56.25%

= 1.4/ (1+(1-0.35)(0.5625))

=1.4/ 1 + (0.65)(0.5625)

=1.4/1.36

= 1.0251

5 0
3 years ago
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