Finance Answers

An investor currently holds the following portfolio:
Amount
Invested
8,000 shares of Stock A $16,000 Beta = 1.3
15,000 shares of Stock B $48,000 Beta = 1.8
25,000 shares of Stock C $96,000 Beta = 2.2
The investor is worried that the beta of his portfolio is too high, so he wants to sell
some Stock C and add Stock D which has a beta of 1.0 to his portfolio. If the investor
wants his portfolio to have a beta of 1.72, how much Stock C must he replace with
Stock D?

Sweatshirt Inc’s ROE is 20%. It’s dividend payout ratio is 70%. The last dividend, just
paid, was RM2.00. If its dividends are expected to grow at the company's internal
growth rate indefinitely, what is the current value of the company's common stock if
its required return is 18%?

In 2000 Jengka Inc. issued bonds with an 8 percent coupon rate and a RM1,000 face
value. The bonds will mature on March 1, 2025. If an investor purchased one of
these bonds on March 1, 2012, determine the yield to maturity if the investor paid
RM1,100 for the bond.

Power of Tower Inc. has bonds that mature in 6½ years with a par value of RM1,000.
They pay a coupon rate of 9% with semiannual payments. If the required rate of
return on these bonds is 11% what is the bond's current value?

You discover an antique in your attic that you purchased at an estate sale 10 years
ago for RM400. You auction it on eBay and receive RM8,000 for your item. What
annual rate of return did you earn?

A number of publicly traded firms pay no dividends to their shareholders yet investors
are willing to buy shares in these firms. How is this possible? Does this violate our
basic principle of stock valuation? Explain your answer.

By using suitable examples, discuss the differences between periodic rate, nominal
rate and effective rate.

What is meant by unsystematic risk? How is it different from the systematic risk?
Describe the sources of unsystematic risk. What will the required rate of return be
when the level of systematic is high?

When do companies incur the agency costs? Support your answer by giving an
example.

When do companies incur the agency costs? Support your answer by giving an
example.