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Aleks04 [339]
3 years ago
14

You have been managing a $5 million portfolio that has a beta of 1.05 and a required rate of return of 9.775%. The current risk-

free rate is 4%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 0.75, what will be the required return on your $5.5 million portfolio
Business
1 answer:
Lilit [14]3 years ago
6 0

Answer:

9.62%

Explanation:

Re = Rf + (B x Rp)

Re = cost of equity = 9.775%

Rf = risk free rate = 4%

B = beta = 1.05

Rp = risk premium = ?

Rp = (Re - Rf) B = (9.775% - 4%)/1.05 = 5.5%

Re portfolio = Rf + {Rp x [(B₁ x $5/$5.5) + (B₂ x $0.5/$5.5)]}

Re portfolio = 4% + {5.5% x [(1.05 x $5/$5.5) + (0.75 x $0.5/$5.5)]}

Re portfolio = 4% + {5.5% x [0.9545 + 0.0682]}

Re portfolio = 4% + 5.6249% = 9.62%

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the required return on the stock of moe's pizza is 12.1 percent and after tax required return on the company's debt is 3.79 perc
Lana71 [14]

Answer:

7.65%

Explanation:

required return = (percent of stock x required return on stock) + (after tax cost of debt  x percent of debt) - adjustment factor

Percent of debt = 100 - 73 = 27%

(12.1 x 0.73) + (3.79 x 0.27) - 2.2 = 7.65%

5 0
3 years ago
Cole has a credit card bill of $3,100. His credit limit is $3,000. Is Cole using credit responsibly or irresponsibly?
Anton [14]
I would say B, because if you exceed the limit on your credit card, that shows that you would know how to add money onto your account. You cannot use more on your credit card than you already have unless you add more money on.
5 0
3 years ago
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Jim's mom is an accountant he has learned quite a bit of information from her about her career what kind of source of informatio
marissa [1.9K]
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5 0
3 years ago
Which type of investment offers other s both capital gain and interested income
vfiekz [6]

Hard assets such as investment real estate can provide an investor with both capital gains and, I believe you meant investment income. Numerous assets classes, depending on the investor's state (country  or geographic area) and that area's tax laws will have significant, and often changing consequences for each type of investment.

However, keep in mind that capital assets are defined by the U.S. IRS as property such as home or car, and ohter investment property such as stocks or bonds.

Several definitions to keep in mind include capital gain or loss, the difference between price paid and price sold (occasionally including holding and selling costs, etc.).  Your basis in the investment property is what you paid for the asset.  


Hope this helps...never heard of interested income, but I don't know everything either. )

3 0
4 years ago
proud family inc., produces a variety of products. the average cost of one widget using ABC costing is closets to
olga55 [171]

Answer:

b. $156.59

Explanation:

Note: The full question is attached as picture below

As the company is under traditional costing system and the allocation base is machine hours.

Variable OH per hour = Total variable cost / Total machine hours

Variable OH per hour = 513,600/32,000

Variable OH per hour = $16.05

Average cost of producing one unit of widget = Direct material per hour + Direct labor per hour + Variable OH per hour

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= $95.52 + $51.04 + $10.03

= $156.59

4 0
3 years ago
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