Suppose that the borrowing rate that your client faces is 9, Ask an Expert

Finance

Suppose that the borrowing rate that your client faces is 9%. Assume that the S&P 500 index has an expected return of 13% and standard deviation of 25%. RF=5% 1) If the client budget is 400,000 and he choose to enter a leveraged position by borrowing an additional 20,000. calculate the expected return of this portfolio
2) Draw the CAL accounting for the higher borrowing rate and showing the position of a client who will choose to borrow and who will invest in both the index and money market fund.

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91223976

Have any Question?Write your Review or question?

Related Questions in Basic Finance

What is the number of shares that must be issued to the new

What is the number of shares that must be issued to the new investor in order for the investor to earn his target return?

If you pay 55 for a share of common stock that has a

If you pay $55 for a share of common stock that has a constant growth rate of 6% and it is expected to pay a dividend of $1.25 what would be your return (hint: solve for kc and be careful about the dividend - it has alre ...

If you deposit 600 every year for the next 9 years with

If you deposit $600 every year for the next 9 years, with first deposit to be made today and all deposits to be made at the beginning of every year, in an account that pays 6.12% APR with annual compounding, how much mon ...

An all-equiry business has 175m shares outstanding selling

An all-equiry business has 175M shares outstanding selling for $20/share. Management believes interest rates are unreasonably low and decides to execute a leveraged recapitalization. It will raise $1B in debt and repurch ...

Artistic adobes is considering growing its business by

Artistic Adobes is considering growing its business by adding a paint machine that costs $90,000. The machine will generate an additional $29,000 in before-tax operating income (excluding depreciation) for the next 5 yea ...

Question - you are given one-year stock options with an

Question - You are given one-year stock options with an exercise price of $30. The current stock price is $30, so the options are at-the-money. Without hedging, the stock price at year-end will either be $28 or $38 with ...

As the financial controller for kl incorporated a highly

As the financial controller for KL Incorporated, a highly diversified conglomerate, you are considering the alternative financing plans for the next millennium. Due to the good relationship with the banks, your firm is a ...

A call option on a stock has an exercise price of 3450 if

A call option on a stock has an exercise price of? $34.50. If the stock price at expiration is? $37.50, what is the option payoff for a short call? position?

How can businesses use technology and relationships to

How can businesses use technology and relationships to reduce their environmental impact?

What is the value today of single payment of 45936 made 8

What is the value today, of single payment of $45,936 made 8 years from today, if the value is discounted at a rate of 24.00%? How many years would it take an investment of $137 to grow to $3,849 at an annual rate of ret ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert