Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.

Get a Professional Answer

Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.

100% Satisfaction Guarantee

Rate the answer you receive.

Ask Linda_us Your Own Question

Linda_us,
Finance, Accounts & Homework Tutor

Category: Homework

Satisfied Customers: 7064

Experience: Post Graduate Diploma in Management (MBA)

19873544

Type Your Homework Question Here...

Linda_us is online now

For Linda
Week Six Assignment: Risk/Return Analysis
Problem

Resolved Question:

For Linda Week Six Assignment: Risk/Return Analysis

Problem 1.

The risk and return profiles of Assets P and Q are given below along with the assigned probability distributions.

Economy Probability Possible Returns on P Possible Return on Q Boom .20 .19 .15 Normal .60 .15 .11 Recession .20 - .04 .05

Required: Given the above information,

a. Compute the expected return and standard deviation for each asset. b. Which asset is riskier based on your calculation? Why? c. Which asset would you choose for investment purposes? Why?

Problem 2.

State Probability Possible Returns on Market Possible Returns on Project 1 .05 -.20 -.30 2 .25 .10 .05 3 .35 .15 .20 4 .20 .20 .25 5 .15 .25 .30

Required: Given the above information, a. Calculate the expected return for the Market and Project and discuss your results. b. Calculate the variance for the Market and Project and discuss your results. c. Calculate the Standard Deviation for the Market and Project and interpret your results. d. Determine the covariance between the Market and Project and discuss your results. e. Determine the correlation co-efficient between the Market and Project and discuss your results. f. What conclusions can you derive from parts a through e? Problem 3.

Investment A Investment B

Probability Return Probability Return Boom .25 .35 .25 .20 Normal .55 .20 .55 .15 Recession .20 -.05 .20 .08

Required: Given the above information,

a. Calculate the expected return and standard deviation for each alternative and discuss your results. b. Calculate the portfolio expected return and standard deviation if you invested 40% of your money in Investment A and the remaining 60% in Investment B. c. Determine the effect on the expected return and standard deviation of your portfolio if you instead decided to invest 20% of your funds in A and 80% in B. d. What conclusions can you derive from your calculations?

Problem 4.

Suntech, Inc., expects to pay a $2.40 dividend next year (D1=$2.40) and the dividend is expected to grow at 4% annually. Suntech has an estimated standard deviation of 24 percent, the market portfolio has a standard deviation of 12 percent, the market expected return is 13 percent and the risk free-free rate is 5 percent. The correlation between Suntech and Market returns is 0.8.

Required: Given the above information,

a. What is Suntech’s beta? b. What is the required rate of return based on the CAPM? c. What is the value of a share of Suntech’s stock? d. Discuss your results.

THIS ANSWER IS LOCKED! You can view this answer by clicking here to Register or Login and paying $3. If you've already paid for this answer, simply Login.

Hi can I have the formula for these for extra money or would I have to post.

I just want the formulas

I. Working Capital Management, i.e., ratios, financial forecasting, Cash Conversion Cycle,

II. Valuation, i.e., mergers, stocks, bonds, capital budgeting, abandonment, etc.on Mergers & Acquisitions and zero

III. Review the data set on Risk vs Return and focus on Standard Deviation, Expected Value, Beta, CAPM, Covariance, Correlation Coefficient, etc.

IV. International Capital Budgeting.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.

JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.

Web sites like justanswer.com/legal ...leave nothing to chance.

Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.

Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.

I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.Freshfield, Liverpool, UK

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.GPHesperia, CA

I couldn't be more satisfied! This is the site I will always come to when I need a second opinion.JustinKernersville, NC

Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. EstherWoodstock, NY

Thank you so much for taking your time and knowledge to support my concerns. Not only did you answer my questions, you even took it a step further with replying with more pertinent information I needed to know. RobinElkton, Maryland

He answered my question promptly and gave me accurate, detailed information. If all of your experts are half as good, you have a great thing going here.DianeDallas, TX