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ADMS 4504 Study Guide - Risk Premium, Capital Asset Pricing Model, Capital Structure

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maroonelk473
9 Oct 2014
School
York University
Department
Administrative Studies
Course
ADMS 4504
Professor
Griffin

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Document Summary

Expected return: a only, b only, c only, a and c only, a, b, and c, you own two risky assets, both of which plot on the security market line. Asset a has an expected return of 12% and a beta of 0. 8. Asset b has an expected return of 18% and a beta of 1. 4. Firm a has a beta of 1. 4, while firm b"s beta is 1. 1. Investors expect the stock to pay a year- end dividend of . 00. The t-bill rate is currently 3% and the market risk premium is 7%. The firm has 104,000 shares of common stock outstanding at a market price of a share. There are 40,000 shares of preferred stock outstanding at a market price of a share. The bond issue has a total face value of ,000 and sells at 102 percent of face value. What is the weighted average cost of capital (wacc) for richbay audio.

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Related Questions

You own a portfolio equally invested in a riskfree asset and two stocks. If one of the stocks has a beta of 1.9 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?

Please show work.

Suppose a risk-free security pays a 8% return, and a market portfolio has an expected return of 9%.

What is the expected return on a portfolio that has $6,000.00 invested in the risk-free security and $4,000.00 invested in the market portfolio? Round your answer to one decimal place.

What is the CAPM beta of the portfolio? Round your answer to two decimal places.

Does the CAPM beta correspond to the portfolio weight invested in the market portfolio?
Yes or No?

1.a) You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta of 1.26 and the total portfolio is equally as risky as the market. What must the beta be for the other stock in your portfolio?

1.b) A stock has an expected return of 17.8 percent, the risk-free rate is 5.1 percent, and the market risk premium is 8.4 percent. What must the beta of this stock be?