An investor is considering three types of investments: a high-risk venture into oil leases with a potential return of 15%, a medium-risk investment in stocks with 9% return, and a relatively safe bond investment with a 5% return. He had $50,000 to invest. Because of the risk,...
an investor is considereing three types of investment: a high-risk venture into oil leases with a potential return of 15%, a medium risk investment in bonds with a 9% return, and a relatively safe stock investment with a 5% return. He has $50,000 to invest. Because of the risk; h...
An investor calculates his return and risk in €. The investor has invested in a U.S. portfolio now worth $1.000. The investor thinks that there is a 40% chance that the portfolio will be worth $1.300 one year from now and a 60% chance that it will be worth $900. The € is now wort...
CAPM, portfolio risk, and return Consider the following information for three stocks, Stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock S...
An Investment Fund manager is required to maximise the return on a portfolio of bonds given the following information: Bond types Projected rate of return Benchmark government 9.1 UK gilts 10.3 Global investment grade (US $) 6.7 Global investment...
According to Investment Digest ("Diversification and the Risk/Reward Relationship", Winter 1994, 1-3), the mean of the annual return for common stocks from 1926 to 1992 was 12.4%, and the standard deviation of the annual return was 20.6%. The article claims that the distributions...
The investor plans to invest in only one of three alternatives: a high-risk stock, a low-risk stock, or a savings account that pays a sure $500. To invest in either stock, the investor must pay a brokerage fee of $200. If the market goes up, the value of the high-risk stock w...
Assuming a not so viscous fluid medium so that the terminal velocity is relatively large, obtain a formula for the terminal velocity (v) of a ball radius R falling through this medium.
Working with a two-factor APT model an investor has found two risk factors, X and Y. The investor is looking at two stocks, A and B. The expected return on stock A is 12% and that of stock B 10%. The beta (factor sensitivity) of stock A with respect to X is 1 and with respect to...
Consider two $60,000 investments – call them Investment A and Investment B. Both investments will earn $5,000 with a probability of 0.5 and $1,000 with a probability of 0.5. Investment A will use 100% equity financing (issuing stocks). Investment B will get $30,000 through issuin...
Term-structure of interest rates and ArbitrageThe current term-structure of spot interest rates for safe zero-coupon bonds isas follows:Maturity, inyearsInterest rate(r)1 8%2 10%3 11%4 12%5 13%There is a safe bond B which has 4 years before maturity and pays a couponof 12% at reg...
he current term-structure of spot interest rates for safe zero-coupon bonds is as follows:Maturity, in yearsInterest rate(r)1 8%2 10%3 11%4 12%5 13%There is a safe bond B which has 4 years before maturity and pays a couponof 12% at regular annual intervals and a face value of $10...