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SteveS, MBA
Category: Homework
Satisfied Customers: 453
Experience:  MBA from Top 5 US Business School, Tutoring Experience for Over Two Years
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Customer Question

1.You want your portfolio beta to be 1.20. Currently, your portfolio consists of $100 invested in stock A with a beta of 1.4 and $300 in stock B with a beta of .6. You have another $400 to invest and want to divide it between an asset with a beta of 1.6 and a risk-free asset. How much should you invest in the risk-free asset?

3. Your portfolio is comprised of 30% of stock X, 50% of stock Y, and 20% of stock Z. Stock X has a beta of .64, stock Y has a beta of 1.48, and stock Z has a beta of 1.04. What is the beta of your portfolio?

4. Which one of the following stocks is correctly priced if the risk-free rate of return is 3.6% and the market rate of return is 10.5%?

Stock Beta Expected Return

A .85 9.2%

B 1.08 11.8%

C 1.69 15.3%

D .71 7.8%

E 1.45 12.3%

5. Jake’s Sound Systems has 210,000 shares of common stock outstanding at a market price of $36 a share. Last month, Jake’s paid an annual dividend in the amount of $1.593 per share. The dividend growth rate is 4%. Jake’s also has 6,000 bonds outstanding with a face value of $1,000 per bond. The bonds carry a 7 % coupon, pay interest annually, and mature in 4.89 years. The bonds are selling at 99% of face value. The company’s tax rate is 34%. What is Jake’s weighted average cost of capital?

Submitted: 7 years ago.
Category: Homework
Expert:  SteveS replied 7 years ago.

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Customer: replied 7 years ago.
Hey steve..thank you I have several questions still on the sight that I need assistance with. I would greatly appreciate any help you can lend me
Expert:  SteveS replied 7 years ago.

I answered two more of your posts. Please review them when you get a chance. Thanks.

Customer: replied 7 years ago.
Thanks again Steve..I am posting one additional question I am hopeful you can assist