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Author Question: The table below shows selected financial data for the Turtle Income fund, the Hare Growth fund, the ... (Read 159 times)

olgavictoria

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on: Jul 10, 2018
The table below shows selected financial data for the Turtle Income fund, the Hare Growth fund, the market portfolio and the risk free asset.
 
  If you wanted to build a portfolio out of T-Bills and the market portfolio to mimic the performance of the Turtle Income Fund, what proportion would you invest in the market portfolio?
 
   Turtle Hare Market Risk Free
  Expected Return 10 13 12 5
  Std Dev. 8.5 17.9 11.9 0
  Beta 0.7143 1.4 1 0
 
  A) 37.1
  B) 50.0
  C) 71.4
  D) 105.7
  E) 140.0

Question 2

The Commuter Solutions Company just paid an annual dividend of 1.12. If you expect a constant growth rate of 4 and have a required rate of return of 13, what is the current stock price according to the constant growth dividend model?
 
  A) 12.44
  B) 12.94
  C) 13.46
  D) There is not enough information to answer this question.


jennafosdick

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Reply #1 on: Jul 10, 2018
Answer to Question 1

C

Answer to Question 2

Answer: B
Explanation: B) The Dividend Growth Model states that P0 = .
Inserting our values gives: P0 = = = = 12.94.


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