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Stock A beta .80 stock B beta 1.40 stock C beta -.30 A.

Customer Question

Stock A beta .80 stock B beta 1.40 stock C beta -.30
A. Rank these stocks from the most risky to the least risky.
B. If the return on the market portfolio increased by 12%, what change would you expect in the return for each of the stocks?
C.If the return on the market portfolio decreased by 5%, what change would you expect in the return for each of the stocks?
D. If you felt that the stock market was getting ready to experience a significant decline, which stock would you probably add to your portfolio? Why?
E. If you anticipated a major stock market rally, which stock would you add to your portfolio? Why?
Mark Goldsmith's broker has shown him two bonds. Each has a maturity of 5 years, a par value of $1000, and a yield to maturity of 12%. Bond A has a coupon interest rate of 6% paid annually. Bond B has a coupon interest rate of 14% annually.
a. Calculate the selling price for each of the bonds. b. Mark has $20000 to invest. Judging on the basis of the price of the bonds,m how many of either one oculd Mark purchase if he were to choose it over the other? (Mark cannot really purchase a fraction of a bond, but for purposes of this question, pretend that he can.) c. Calculate the eyarly interest income of each bond on the basis of its coupon rate and the number of bonds that Mark could buy with his $20000. D. Assume that Mark will reinvest the interest payments as they are paid (at the end of each year) and that his rate of return on the reinvestment is only 10%. For each bond, calculate the value of the principal payment plus the value of Mark's reinvestment account at the end of the 5 years. e. Why are the two values calculated in part d different? If Mark were worried that he would earn less than the 12% yield to maturity on the reinvested interest payments, which of these two bons would be a better choice?
Submitted: 6 years ago.
Category: Homework
Expert:  Neo replied 6 years ago.
Good day!

Welcome to JustAnswer!

Which Chapter are these located?
Customer: replied 6 years ago.

Chapter 5

Chapter 6

 

Managerial Finance

twelfth editon

Lawrence J. Gitman

Expert:  Neo replied 6 years ago.
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