Question;Geraldine Burroughs;Week 7 Chapter 11 & 12 Homework;P2.;In late 2010, you purchased the common;stock of a company that has reported significant earnings increases in nearly;every quarter since your purchase. The price of the stock increased from $12 a share at the time of the;purchase to a current level of $45. Notwithstanding;the success of the company, competitors are gaining much strength. Further;your analysis indicates that the stock may be over-priced based on your;projection of future earnings growth. Your analysis, however, was the same one;year ago and the earnings have continued to increase. Actions you might take;range from an outright sale of the stock (and the payment of capital gains tax);to doing nothing and continuing to hold shares. You reflect on these choices as;well as other actions that could be taken. Describe the various actions that;you might take and their implications.;P3.;Which of the following securities is;likely to be the most liquid according to this data? Explain;Stock BID ASK;R $39.43 $39.55 Spread =.12;S;$13.67 $13.77 Spread =.10;T;$116.02 $116.25 Spread =.23;Chapter 12;P2.;Based upon your answers to question1, which;asset appears riskiest based on the standard deviation?;Based on coefficient of variation?;P3. Pg 327 table 12.4 table;Recalling the definitions of risk premiums;from Chapter 8 and using the Treasury bill return in Table 12.4 as an;approximation to the nominal risk-free rate, what is the risk premium from;investing in each of the other asset classes listed in Table 12.4?;Find the stock risk;premium.;To find the stock risk;premium you are going to subtract the treasury bills from the stocks.;P18.;More conservative portfolio;Tim?s portfolio contains two shocks;Lightco and Shinceco. Last year his portfolio returned 14 percent. Lightco?s;return was 5 percent and Sineco returned 20 percent. What are the weights of;each in Tim?s portfolio?;The following year Tim adds a third stock, Brightco;and reallocates his funds among three stocks. Lightco and Shineco have the same;weight in the portfolio, and Brightco?s weight is one-half of Lightco. During;the year Lightco returns 10 percent, Shineco returns 12 percent, and Brightco;loses 5 percent. What was the return on his portfolio?
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