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Norma-Jean [14]
2 years ago
6

If your risk-aversion coefficient is A = 4.4 and you believe that the entire 1926–2015 period is representative of future expect

ed performance, what fraction of your portfolio should be allocated to T-bills and what fraction to equity? Assume your utility function is U = E(r) – 0.5 × Aσ2
Business
1 answer:
tamaranim1 [39]2 years ago
8 0

Answer:

=> fraction of the portfolio that should be allocated to T-bills = 0.4482 = 44.82%.

=> fraction to equity = 0.5518 = 55.18%.

Explanation:

So, in this question or problem we are given the following parameters or data or information which are; that the utility function is U = E(r) – 0.5 × Aσ2 and the risk-aversion coefficient is A = 4.4.

The fraction of the portfolio that should be allocated to T-bills and its equivalent fraction to equity can be calculated by using the formula below;

The first step is to determine or Calculate the value of fraction to equity.

Hence, the fraction to equity = risk premium/(market standard deviation)^2 - risk aversion.

= 8.10% ÷ [(20.48%)^2 × 3.5 = 0.5518.

Therefore, the value for fraction of the portfolio that should be allocated to T-bills = 1 - fraction to equity = 1 - 0.5518 =0.4482 .

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The type of entry mode is TRADE RELATED ENTRY.
Build operate transfer is a trade related entry mode into international business in which a foreign investor takes up the responsibility for training, designing and constructing an operation and when the operation is completed he hands it over to the buyer and the management of the project will be taken up by those he trained.
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2 years ago
It will cost $7,000 to acquire an ice cream cart. Cart sales are expected to be $3,600 a year for three years. After the three y
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Answer:

It will take 2 years and 344 days to cover for the initial investment.

Explanation:

Giving the following information:

Initial investment= $7,000

Cash flow year 1 trough 3= $3,600

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<u>To be more accurate:</u>

(3,400/3,600)*365= 344

It will take 2 years and 344 days to cover for the initial investment.

8 0
2 years ago
The standards for direct labor for a product are 2.5 hours at $8 per hour. Last month, 9,000 units of the product were made and
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Answer:

21,500

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Given that,

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Standards for direct labor for a product = 2.5 hours

Labor efficiency variance = (Standard Hour for actual output - Actual Hour) × Standard Rate

$8,000 = [(9,000 × 2.5) - Actual Hour] × $8 per hour

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Actual hour = 22,500 - 1,000

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Therefore, the actual number of hours worked during the past period was 21,500.

5 0
2 years ago
Parkway Void Co. issued 15-year bonds two years ago at a coupon rate of 5.4 percent. The bonds make semiannual payments. If thes
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Answer:

YTM = 4.795%

Explanation:

The formula for yield to maturity (YTM) is given as follows.

YTM = [C + (F - P)/N) / [(F + P)/2] where

C = Coupon payment

F = Face value of bond

P = Price of bond

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In the given scenario, note that the payments are semi-annual. Therefore:

C = 2.7% x 1000 = $27  

F = $1000

P = 106% x $1000 = $1060

N = (15 - 2) x 2 = 26

YTM = [$27 + ($1000 - $1060) / 26] / [($1000 + $1060) / 2]

       = $24.692 / $1030

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"creates a path to follow" which goal-setting step is described by this sentence?
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