devry fin 515 week 5 problem set,devry fin 515 week 5,devry fin 515 week 5,devry fin 515,devry fin 515 week 5 tutorial,devry fin 515 week 5 assignment,devry fin 515 week 5 help

1. FIN 515 Week 5 Problem Set
Check this A+ tutorial guideline at
http://www.fin515entirecourse.com/fin-
515/fin-515-week-5-problem-set
For more classes visit
http://www.fin515entirecourse.com FIN 515
Week 5 Problem Set
www.fin515entirec
ourse.comChapter 10 (pages 345-348)
4. You bought a stock one year ago for $50 per
share and sold it today for $55 per share. It
paid a $1 per share dividend today.
a. What was your realized return?

2. b. How much of the return came from
dividend yield and how much came from
capital gain?
20. Consider two local banks. Bank A has
100 loans outstanding, each for $1 million,
that it expects will be repaid today. Each
loan has a 5% probability of default, in
which case theris not repaid anything. The chance of
ault is independent across all the loans.
Bank B has only one loan of $100 million
outstanding, which it also expects will be
repaid today. It also has a 5% probability of
not being repaid. Explain the difference
between the type of risk each bank faces.
Which bank faces less risk? Why?
22. Consider the following two, completely
separate, economies. The expected return and

3. volatility of all stocks in both economies is the
same. In the first economy, all stocks move
together—in good times all prices rise
together and in bad times they all fall
together. In the second economy, stock
returns are independent—one stock
increasing in price has no effect on the prices
of other stocks. Assuming you are risk-averse
and you could choose one of the two
economies in which to invest, which one
30. What does the beta of a stock measure?
35. Suppose the market risk premium is 5%
and the risk-free interest rate is 4%. Using the
data in Table 10.6 (also shown above),
calculate the expected return of investing in
a. Starbucks' stock.

4. b. Hershey's
stock.
c. Autodesk's
stock.
Chapter 11 (pages 390-396):
2. You own three stocks: 600 shares of Apple
Computer, 10,000 shares of Cisco Systems,
and 5,000 shares of Colgate-Palmolive. The
current share prices and expected returns of
W'Apple, Cisco, andColgate-Palmolive are,
IT1 respectively, $500, $20, $100 and 12%,
10%,
8%.
a. What are the portfolio weights of the three
stocks in your portfolio?
b. What is the expected return of your
portfolio?
c. Suppose the price of Apple stock goes up by
$25, Cisco rises by $5, and Colgate-Palmolive

5. falls by $13. What are the new portfolio
weights?
d. Assuming the stocks' expected returns
remain the same, what is the expected return
of the portfolio at the new prices?
50. Suppose Autodesk stock has a beta of 2.16,
whereas Costco stock has a beta of 0.69. If the
risk-free interest rate is 4% and the expected
return of the market portfolio is 10%, what is
the expected return of a portfolio that consists
of 60% Autodesk stock and 40% Costco stock,
according to the CAPM?
Chapter 12 (page 431):
26. Unida Systems has 40 million shares
outstanding trading for $10 per share. In
addition, Unida has $100 million in

6. outstanding debt. Suppose Unida's equity cost
of capital is 15%, its debt cost of capital is 8%,
and the corporate tax rate is 40%.
a. What is Unida's unlevered cost of capital?
b. What is Unida's after-tax debt cost of
capital?
c. What is Unida's weighted average cost of
capital?
27. You would like to estimate the weighted
average cost of capital for a new airline
business. Based on its industry asset beta, you
have already estimated an unlevered cost of
capital for the firm of 9%. However, the new
business will be 2 5% debt financed, and you
anticipate its debt cost of capital will be 6%. If
its corporate tax rate is 40%, what is your
estimate of its WACC?

7. outstanding debt. Suppose Unida's equity cost
of capital is 15%, its debt cost of capital is 8%,
and the corporate tax rate is 40%.
a. What is Unida's unlevered cost of capital?
b. What is Unida's after-tax debt cost of
capital?
c. What is Unida's weighted average cost of
capital?
27. You would like to estimate the weighted
average cost of capital for a new airline
business. Based on its industry asset beta, you
have already estimated an unlevered cost of
capital for the firm of 9%. However, the new
business will be 2 5% debt financed, and you
anticipate its debt cost of capital will be 6%. If
its corporate tax rate is 40%, what is your
estimate of its WACC?