Business, 24.12.2019 22:31 chaparro0512

You own a portfolio equally invested in a risk-free asset and two stocks. if one of the stocks has a beta of 1.16 and the total portfolio is exactly as risky as the market, what must the beta be for the other stock in your portfolio

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Answer from: cathydaves

Beta of stock A (βA) = 1.16

Beta of stock B (βB) = ?

Beta of the portfolio (βP) = 1

Weight of stock A (WA) = 50% = 0.50

Weight of stock B (WB) = 50% = 0.50

β(P) = βA(WA) + βB(WB)

1 = 1.16(0.50) + βB(0.50)

1 = 0.58 + 0.50βB

1 - 0.58 = 0.50βB

0.42 = 0.50βB

0.42 = βB

0.50

βB = 0.84

Explanation:

Beta of a portfolio equals beta of stock A multiplied by weight of stock A plus beta of stock B multiplied by weight of stock B. The beta of the portfolio is 1 because the portfolio is as risky as the market. Beta of stock A has been provided. The weight of stock A and stock B are 50% respectively because equal amount of fund is invested in each security.

Answer from: Quest

of the three mortgage options that demarco and tanya have to choose from, the balloon payment mortgage would be their best option, over adjustable payment and fixed payment plans.ultimately, the balloon payment plan would save demarco and tanya overall, in interest, would cost less monthly, and they would only have to make these payments for 8 years, opposing to 30 years for adjustable or fixed payment plans.

overall, demarco and tanya would save $80,811 if they chose balloon payments over fixed payments, and would save $116,711 if they choose balloon payments over adjustable payments. benefits with choosing fixed payments over adjustable payments is that, in the end, the payments will still be $836.30 a month, while with adjustable payments, the initial monthly payments will be $763.38 to $1082.70 a month, ultimately leading to a more costly purchase. benefits with choosing fixed payments over balloon payments are not present. benefits in choosing adjustable payments over is that it has a lower interest rate, and starts with lower monthly payments initially. benefits in choosing adjustable payments over balloon payments include a lower interest rate, and lower initial monthly payments. benefits in choosing balloon payments over fixed payments include lower interest rates, lower overall price, lower monthly payments, takes less time to pay off, and does not require a downpayment. benefits in choosing balloon payments over adjustable payments include, lower monthly payments (when averaged), takes less time to pay off, and lower overall price.

hence, option c, balloon payments, is the best option for demarco and tanya to make this purchase, for it will save them a minimum of $80811, and a maximum of $116,711.

Answer from: Quest

One stage of the union organizing process involves the legal requirement that at least 30% of the employees in a potential bargaining unit express a desire for union representation by signing union authorization cards.

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You own a portfolio equally invested in a risk-free asset and two stocks. if one of the stocks has a...

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