6142 × 1.6] + [1.1265 × (– 4.4)] – [1.2181 × 3.4] + [1.7058 × (– 4.0)] = –16.90% β = [–0.6142 × 1.3] + [1.1265 × 1.8] – [1.2181 × 0.70] + [1.7058 × 1] = 2.08 The high beta (higher than any individual beta) results from the short positions in the relatively low beta stocks and the long positions in the relatively high beta stocks. 2(e) = [(–0.6142)2×3364] + [1.12652×5041] + [(–1.2181)2×3600] + [1.70582×3025] = 21‚809.6 (e) = 147.68% The levered position in B [with high 2(e)] overcomes
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Nike‚ Inc Cost of Capital NorthPoint Large Cap Fund was considering whether to buy Nike’s stock or not. Nike was experiencing declines in sales growth‚ declines in profits and market share. However‚ Nike decided it would increase exposure in mid-price footwear and apparel lines‚ and it also commits to cut down expenses. The market responded with mixed signals to Nike’s changes. Kimi Ford‚ the portfolio manager at NorthPoint‚ did a cash flow estimation‚ and ask her assistant‚ Joanna Cohen to estimate
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linear regression models. Problem 2 The beta of a stock is found by running a regression with the explanatory variable being the monthly return on a market index and the dependent variable being the monthly return on the stock. The beta of the stock is then the slope of this regression. a Explain why most stocks have a positive beta. b Explain why a stock whit a beta with absolute value greater than 1 is more volatile than the market and a stock with a beta less than 1 (in absolute value) is less
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of beta-carotene (which is converted to vitamin A by the body)‚ providing the equivalent of 35% of the RDA for vitamin A (3) Bananas Bananas are a great source of potassium‚ which plays a key role in heart health and muscle function. Plus each one has 2 g of fiber. (4) Blueberries Blueberries help prevent and treat bladder infections by making it hard for bacteria to stick to urinary tract walls. (5) Cantaloupe An antioxidant double whammy‚ with 68 mg of vitamin C and enough beta-carotene
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Chapter 9 Practice Questions 1. The total market value of the common stock of the Okefenokee Real Estate Company is $6 million‚ and the total value of its debt is $4 million. The treasurer estimates that the beta of the stock is currently 1.5 and that the expected risk premium on the market is 6 percent. The Treasury bill rate is 4 percent. Assume for simplicity that Okefenokee debt is risk-free and the company does not pay tax. a. What is the required return on Okefenokee stock? requity
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is what a real leader would do. Joining the Beta Club where each member is a leader will allow me to
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model. Daily close price of all the 30 securities of BSE Sensex for the period of 1 year from January 2013 to December 2013 is taken for analysis. In this model the securities ’ inclusion in the portfolio is directly related to its excess return-to-beta ratio. Then they are ranked from highest to lowest order. The number of securities selected depends on a unique Cut- off rate such that all securities with higher ratios will be included. Percentage of investment in each of the selected security is
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deviation of 8.2 is a pretty strong deviation‚ and shows people that are willing to invest in the company that they are investing in a strong company that has shown the ability to grow‚ and create dividends for its stock holders consistently. The beta of .73 shows that Nike’s returns are somewhat similar to that of the markets‚ but still not enough to be affected by the overall economic situation the market may face. The coefficient variation of 9.37 is not bad‚ but it does not paint the whole
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decision. The Beta Model in the unit profitability report shows a higher range in the price per unit‚ variable cost per unit‚ fixed overhead and profit. To make a managerial decision Maria has to evaluate the fixed costs and the variable costs‚ this will allow to proceed with a safe and useful decision. Maria has to evaluate certain criteria for San Juan Cell Phone such as the how the product sales ‚ the cost of goods sold ‚ variable operating and marketing expenses for the Alpha and Beta models. The
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to the new venture. For this reason we calculated the beta of the project based on the beta of the sodium chlorate industry. We focused on Brunswick and Southern Chemical which are pure play sodium chlorate companies. The average unleveraged beta obtained from the two companies is 1.035 which reflects the risk of the project. Adjusting Dixon’s beta by re-levering it using its own target capital structure of 35% ends with a beta of 1.59. The beta obtained is used to derive the CAPM method‚ resulting
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