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##### Jill Angel holds a \$200,000 portfolio consisting of the following

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Jill Angel holds a \$200,000 portfolio consisting of the following stocks. The portfolio's beta is 0.875.;Stock;Investment;Beta;A;\$50,000;0.50;B;\$50,000;0.80;C;\$50,000;1.00;D;\$50,000;1.20;Total;\$200,000;If Jill replaces Stock A with another stock, E, which has a beta of 1.85, what will the portfolio's new beta be?;0.92;1.21;1.30;1.14;1.35;Niendorf Corporation's 5-year bonds yield 8.25%, and 5-year T-bonds yield 4.80%. The real risk-free rate is r* = 2.75%, the inflation premium for 5-year bonds is IP = 1.65%, the default risk premium for Niendorf's bonds is DRP = 1.20% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t ? 1) 0.1%, where t = number of years to maturity. What is the liquidity premium (LP) on Niendorf's bonds?;2.50%;2.25%;2.72%;1.87%;2.54%;Suppose the yield on a 10-year T-bond is currently 5.05% and that on a 10-year Treasury Inflation Protected Security (TIPS) is 1.30%. Suppose further that the MRP on a 10-year T-bond is 0.90%, that no MRP is required on a TIPS, and that no liquidity premium is required on any T-bond. Given this information, what is the expected rate of inflation over the next 10 years? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average.;3.45%;3.33%;2.85%;2.82%;3.51%

Paper#34215 | Written in 18-Jul-2015

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