Your eccentric Aunt Claudia has left you $50,000 in BP shares plus $50,000 cash. Unfortunately, her will requires that the BP stock not be sold for one year and the $50,000 cash must be entirely invested in one of the stocks shown below. Toronto Dominion Bank 0.60 0.16 0.05 0.38 1.00 BHP Billiton Siemens Nestlé LVMH Toronto Dominion Bank Samsung BP Standard deviation (%) BHP Billiton Siemens 1.00 0.39 1.00 BHP Siemens Nestlé LVMH Toronto Dominion Bank Samsung BP 28.60 Portfolio Variance 25.40 Nestlé -0.05 0.29 1.00 9.24 LVMH 0.42 0.14 0.04 1.00 20.20 11.70 Samsung 0.52 0.36 -0.03 0.56 0.20 1.00 30.50 a. Calculate the portfolio variance for seven different portfolios. (Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answers as a decimal rounded to 5 places.) BP 0.49 -0.07 0.05 0.06 0.35 0.36 1.00 19.80

Your eccentric Aunt Claudia has left you $50,000 in BP shares plus $50,000 cash. Unfortunately, her will requires that the BP stock not be sold for one year and the $50,000 cash must be entirely invested in one of the stocks shown below. Toronto Dominion Bank 0.60 0.16 0.05 0.38 1.00 BHP Billiton Siemens Nestlé LVMH Toronto Dominion Bank Samsung BP Standard deviation (%) BHP Billiton Siemens 1.00 0.39 1.00 BHP Siemens Nestlé LVMH Toronto Dominion Bank Samsung BP 28.60 Portfolio Variance 25.40 Nestlé -0.05 0.29 1.00 9.24 LVMH 0.42 0.14 0.04 1.00 20.20 11.70 Samsung 0.52 0.36 -0.03 0.56 0.20 1.00 30.50 a. Calculate the portfolio variance for seven different portfolios. (Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answers as a decimal rounded to 5 places.) BP 0.49 -0.07 0.05 0.06 0.35 0.36 1.00 19.80

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 11P

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Your eccentric Aunt Claudia has left you $50,000 in BP shares plus $50,000 cash. Unfortunately, her will requires that the BP stock not be sold for one year and the $50,000 cash must be entirely invested in one of the stocks shown below. BHP Billiton BP Siemens Nestlé Sony Sanofi Agricultural Bank Standard deviation (%) Required A Required B BHP Billiton 1.00 20.60 BHP BP Siemens Nestlé Sony Sanofi Agricultural Bank BP 0.31 1.00 29.40 Siemens 0.05 0.33 1.00 Portfolio Variance 9.00 Complete this question by entering your answers in the tabs below. Nestlé 0.34 0.22 0.12 1.00 15.40 Sony 0.52 0.19 0.13 0.30 1.00 27.70 Sanofi 0.44 0.36 0.05 0.48 0.20 1.00 a. Calculate the portfolio variance for seven different portfolios. Note: Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answers as a decimal rounded to 5 places. b. What is the safest attainable portfolio under these restrictions? 28.90 Agricultural Bank 0.41 0.09 0.13 Calculate the…
Your eccentric Aunt Claudia has left you $50,000 in BP shares plus $50,000 cash. Unfortunately, her will requires that the BP stock not be sold for one year and the $50,000 cash must be entirely invested in one of the stocks shown below. BHP Billiton BP Siemens Nestlé Sony Sanofi Agricultural Bank Standard deviation, % Agricultural BHP Billiton BP 1.00 Siemens Nestlé Sony Sanofi Bank 0.44 0.21 -0.05 0.21 0.15 0.24 1.00 0.40 0.24 0.27 0.36 0.27 1.00 0.26 0.33 0.29 0.21 1.00 0.34 0.27 -0.06 1.00 0.27 0.35 1.00 0.17 1.00 26.2 22.8 22.5 13.6 27.6 17.5 25.5 a. Calculate the portfolio variance for seven different portfolios. Note: Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answers as a decimal rounded to 5 places. b. What is the safest attainable portfolio under these restrictions? Complete this question by entering your answers in the tabs below. Required A Required B Calculate the portfolio variance for seven different portfolios.…
Help Your eccentric Aunt Claudia has left you $50,000 in BP shares plus $50,000 cash. Unfortunately, her will requires that the BP stock not be sold for one year and the $50,000 cash must be entirely invested in one of the stocks shown below. BHP Billiton BP Siemens Nestlé Sony Sanofi Agricultural Bank Standard deviation, % Agricultural BHP Billiton BP 1.00 Siemens Nestlé Sony Sanofi Bank 0.44 0.21 -0.05 0.21 0.15 0.24 1.00 0.40 0.24 0.27 0.36 0.27 1.00 0.26 0.33 0.29 0.21 1.00 0.34 0.27 -0.06 1.00 0.27 0.35 1.00 0.17 1.00 26.2 22.8 22.5 13.6 27.6 17.5 25.5 a. Calculate the portfolio variance for seven different portfolios. Note: Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answers as a decimal rounded to 5 places. b. What is the safest attainable portfolio under these restrictions? Complete this question by entering your answers in the tabs below. Required A Required B Calculate the portfolio variance for seven different…
Your company, Ohiobucks (OB), hires an investment bank to underwrite an issue of 10 million shares of OB stock on a best-effort basis. The investment bank sells 8 million shares and charges OB $0.225 per share sold. The price of each share is $10.50. How much will the investment bank earn after the issuance? A. $7.0 MM B. $7.5 MM C. $1.8 MM D. $1.0 MM
Amherst Corporation, an investment banking company, often has extra cash to invest. Suppose Amherst buys900 shares of Hurricane Corporation stock at $57 per share, representing less than 5% ofHurricane’s outstanding stock. Amherst expects to hold the Hurricane stock for one month andthen sell it. The purchase occurs on December 15, 2018. On December 31, the market price of ashare of Hurricane stock is $58 per share.Requirements1. What type of investment is this for Amherst? Give the reason for your answer.2. Record Amherst’s purchase of the Hurricane stock on December 15 and the adjustment tomarket value on December 31.3. Show how Amherst would report this investment on its balance sheet at December 31 andany gain or loss on its income statement for the year ended December 31, 2018.
You sell short 300 shares of Microsoft that are currently selling at $30 per share. You post the 50% margin required on the short sale. If you earn no interest on the funds in your margin account, what will be your rate of return after 1 year if Microsoft is selling at $29? (Ignore any dividends.) Select one: а. 20% b. 15% C. 6.67% d. 10%
If iOS Corp. issues an additional $8 million of debt and uses this money to retire common stock, what will be the expected return on the stock? Assume that the change in capital structure does not affect the risk of the debt, and recall that the WACC under the initial capital structure is 13.85%. Enter your answer as a percentage. Do not include the percentage sign in your answer. Enter your answer rounded to 2 DECIMAL PLACES. TE= Number Click "Verify" to proceed to the next part of the question.
Suppose you sell short 200 shares of BP ADR currently selling at $40 per share. You give your broker $5000 to establish your margin account. You have no interest on the funds in your margin account. Assume that BP also has paid a year-end dividend of $0.5 per share, what will be your rate of return after one year if the BP price is $38. (please keep three decimal places, such as 0.031, NOT 3.1%)
Suppose that you sell short 1000 shares of Xtel, currently selling for $50 per share, and give your broker $40,000 to establish your margin account. a. If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) $55; (ii) $50; (iii) $46? Assume that Xtel pays no dividends. (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) b. If the maintenance margin is 25%, how high can Xtel’s price rise before you get a margin call? (Round your answer to 2 decimal places.) c. Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of $2 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid. (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.)
Lancaster Corporation, an investment banking company, often has extra cash to invest. Suppose Lancaster buys500 shares of Knight Corporation stock at $40 per share, representing less than 5% of Knight’soutstanding stock. Lancaster expects to hold the Knight stock for one month and then sell it.The purchase occurs on December 15, 2018. On December 31, the market price of one share ofKnight stock is $47 per share.Requirements1. What type of investment is this for Lancaster? Give the reason for your answer.2. Record Lancaster’s purchase of the Knight stock on December 15 and the adjustment tomarket value on December 31.3. Show how Lancaster would report this investment on its balance sheet at December 31 andany gain or loss on its income statement for the year ended December 31, 2018
Suppose that you sell short 1,000 shares of Xtel, currently selling for $20 per share, and give your broker $15,000 to establish your margin account.a. If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) $22; (ii) $20; (iii) $18? Assume that Xtel pays no dividends.b. If the maintenance margin is 25%, how high can Xtel’s price rise before you get a margin call?c. Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of $1 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid.
Monmouth Laboratories, Inc. pays a $3.29 dividend every year and will maintain this policy forever. What price should you pay for one share of common stock if you want an annual return of 7.5% on your investment? Select one: a. $43.87 b. $21.92 c. $43.84 d. $44.84 e. $43.20