06_excersise(编辑修改稿)

06_excersise(编辑修改稿)内容摘要：

lation coefficient was 0 or ? c. Is M. Grandet’s portfolio better or worse than one invested entirely in share A, or is it not possible to say? a. Expected return = (  15) + (  20) = 17% Variance = ()2 (20)2 + ()2  (22)2 + 2()()()(20)(22) = 327 Standard deviation = (327)(1/2) = % 6 b. Correlation coefficient = 0  Standard deviation = % Correlation coefficient =  Standard deviation = % c. His portfolio is better. The portfolio has a higher expected return and a lower standard deviation. 7. The Treasury bill rate is 4 percent, and the expected return on the market portfolio is 12 percent. On the basis of the capital asset pricing model: a. Draw a graph similar to Figure showing how the expected return varies with beta. b. What is the risk premium on the market? c. What is the required return on an investment with a beta of ? d. If an investment with a beta of .8 offers an expected return of percent, does ithave a positive NPV? e. If the market expects a return of percent from stock X, what is its beta? a. b. Market risk premium = rm rf = = = % c. Use the security market line: r = rf + (rm rf) r = + [( )] = = % d. For any investment, we can find the opportunity cost of capital using the security market line. With  = , the opportunity cost of capital is: r = rf + (rm rf) r = + [( )] = = % The opportunity cost of capital is percent and the investment is expected to earn percent. Therefore, the investment has a negative NPV. e. Again, we use the security market line: r = rf + (rm rf) = + ( )   = 10. Percival Hygiene has $10 million invested in longterm corporate bonds. This bond portfolio’s expected annual rate of return is 9 percent, and the annual standard deviation is 10 percent. Amanda Reckonwith, Percival’s financial adviser, remends that Percival consider investing in an index fund which closely tracks the Standard and Poor’s 500 index. The index has an expected return of 14 percent, and its standard deviation is 16 percent. a. Suppose Percival puts all his money in a bination of the index fund and Treasury bills. Can he thereby improve his expected rate of return without changing the risk of his 051015200 0 .5 1 1 .5 2B e t aExpected Return 7 portfolio? The Treasury bill yield is 6 percent. b. Could Percival do even better by investing equal amounts in the corporate bond portfolio and the index fund? The correlation between the bond portfolio and the index fund is +.1. a. Percival’s current portfolio provides an expected return of 9 percent with an annual standard deviation of 10 percent. First we find the portfolio weights for a bination of Treasury bills (security 1: standard deviation = 0 percent) and the index fund (security 2: standard deviation = 16 percent) such that portfolio standard deviation is 10 percent. In general, for a two security portfolio: P2 = x1212 + 2x1x21212 + x2222 ()2 = 0 + 0 + x22()2 x2 =  x1 = Further: rp = x1r1 + x2r2 rp = (  ) + (  ) = = % Therefore, he can improve his expected rate of return without changing the risk of his portfolio. b. With equal amounts in the corporate bond portfolio (security 1) and the index fund (security 2), the expected return is: rp = x1r1 + x2r2 rp = (  ) + (  ) = = % P2 = x1212 + 2x1x21212 + x2222 = ()2()2 + 2()()()()() + ()2()2 = = = % Therefore, he can do even better by investing equal amounts in the corporate bond portfolio and the index fund. His expected return increases to % and the standard deviation of his portfolio decreases to %. CHAPTER 9 Capital Budgeting and Risk a. The total market value of outstanding debt is 300,000 euros. The cost of debt capital is 8 percent. For the mon stock, the outstanding market value is: (50 euros  10,000) = 500,000 euros. The cost of equity capital is 15 percent. Thus, Lorelei’s weightedaverage cost of capital is: )( 0 . 1 55 0 0 , 0 0 03 0 0 , 0 0 05 0 0 , 0 0 0( 0 . 0 8 )5 0 0 , 0 0 03 0 0 , 0 0 03 0 0 , 0 0 0r a s s e t s    8 rassets = = % b. Because business risk is unchanged, the pany’s weightedaverage cost of capital will not change. The financial structure, however, has changed. Common stock is now worth 250,000 euros. Assuming that the market value of debt and the cost of debt capital are unchanged, we can use the same equation as in Part (a) to calculate the new equity cost of capital, requity: )e q u i t yr (2 5 0 , 0 0 03 0 0 , 0 0 02 5 0 , 0 0 0( 0 . 0 8 )2 5 0 , 0 0 03 0 0 , 0 0 03 0 0 , 0 0 00 . 1 2 4    requity = = % a. The threat of a coup d’233。 tat means that the expected cash flow is less than $250,000. The threat could also increase the discount rate, but only if it increases market risk. b. The expected cash flow is: [(  0) + (  250,000)] = $187,500 Assuming that the cash flow is about as risky as the rest of the pany’s business: PV = $187,500/ = $167,411 a. Expected daily production = (  0) + () [( x 1,000) + ( x 5,000)] = 2,720 barrels Expected annual cash revenues = 2,720 x 365 x $15 = $14,892,000 b. The possibility of a dry hole is a diversifiable risk and should not affect the discount rate. This possibility should affect forecasted cash flows, however. See Part。