Answer:
a. 87.5%
b. Stock A: 21%; Stock B: 28%; Stock C: 38.5%; T-bill: 12.5%
c. Standard deviation of the client's portfolio: 26.25%
Explanation:
a. y is calculated as:
Risky portfolio return * y + T-bill return * (1 - y) = Expected return of the portfolio <=> 0.14y + 0.06 ( 1-y) = 0.13 <=> y = 87.5%
b. Client investment in each stock and in T-bills:
Client investment in each stock = 0.875 * percentage of each stock in a risky portfolio ( because the risky portfolio is accounted for 87.5% of the whole investment)
=> Stock A = 24% x 0.875 = 21% ; Stock B = 32% * 0.875 = 28% ; Stock C = 44 * 0.875 = 38.5%
Client investment in T-bill = 1- y = 1 - 0.875 = 12.5%
c. Standard deviation is calculated as: Standard deviation of risky portfolio * y = 30% * 87.5% = 26.25% (because standard deviation of return in T-bill is 0)
Answer: market power is greatest in industry C.
Explanation:
The Herfindahl–Hirschman Index, is the measure of market concentration. It is calculated by squaring the market share of every firm that is competing in the market after which the resulting numbers will be added.
A market that has an HHI of less than 1,500 is said to be a competitive marketplace. A market that has an HHI of 1,500 to 2,500 is said to be moderately concentrated while a market that has an HHI of 2,500 or more is said to be highly concentrated. Therefore, the industry with the highest Herfindahl indexes here is industry C with 5000 and it has the most market power.
Answer:
C. Prices in the country Increase
Explanation:
Inflation describes the general increase in prices in a country over time. Prices tend to rise with the increase in economic growth. A high economic growth rate implies that prices will increase at a high rate.
The Inflation rate is measured by assessing changes in the prices of products and services representing people's consumption. A rise in the inflation rate indicates a general increase in prices.
Answer:
WACC 8.53600%
Explanation:
The Weighted average cost of capita lconsiders the weight of the equity times the cost of it.
And the wight of the dbet times the cost of financing after the tax shield.
Ke 0.11000
Equity weight 0.65
Kd 0.06
Debt Weight 0.35
t 0.34
WACC 8.53600%
