GB 550 Unit 3 Assignment 2.docx

GB 550 Unit 3 Assignment 2.docx - David Rader Week 3...

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David Rader Week 3 Problems GB 550 February 10, 2019
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5.2 Maturity: 12 Par value: 1,000 Annual Interest: 100 Price: 850% YTM: 12.48% 6.7 a. rA= rRF + beta * (rm-rRF) .12 = .05 + beta * (.10 - .05) .12 = .05 + beta * .05 .12-.05 = .05 - .05 + beta * .05 .07 = beta * .05 .07/.05 = beta * .05/.05 Beta = 1.40 b. rA= .05 + 2(.05) = .15 or 15% A’s rate of return is 15% 6.11 $2 million dollar portfolio with $100,000 investment in 20 stocks. The beta is 1.1. Selling $100,000 worth of one stock with a beta of .9 and use the proceeds o purchase a stock with a beta of 1.4.
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  • Spring '19
  • 15%, $100,000, $2 million, 2 million dollar, 12.48%

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