Author Question: Akai has a portfolio of three assets. Find the expected rate of return for the portfolio assuming he ... (Read 158 times)

Yi-Chen

  • Hero Member
  • *****
  • Posts: 550
Akai has a portfolio of three assets. Find the expected rate of return for the portfolio assuming he invests 50 percent of its money in asset A with 10 percent rate of return, 30 percent in asset B with a rate of return of 20 percent, and the rest in
 
  asset C with 30 percent rate of return.

Question 2

What potential biases exist in project selection if Nico Manufacturing did not adjust for the difference in risk between Projects X and Y (See Table 11.10).
 
  What will be an ideal response?



jaygar71

  • Sr. Member
  • ****
  • Posts: 323
Answer to Question 1

Expected rate of return = 17 percent.

Answer to Question 2

The danger of not accounting for differences in project risk is that the firm may potentially chose unacceptable high-risk projects (with negative NPVs) over potentially acceptable low-risk projects (with positive NPVs).



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

Asthma cases in Americans are about 75% higher today than they were in 1980.

Did you know?

Drug-induced pharmacodynamic effects manifested in older adults include drug-induced renal toxicity, which can be a major factor when these adults are experiencing other kidney problems.

Did you know?

All adverse reactions are commonly charted in red ink in the patient's record and usually are noted on the front of the chart. Failure to follow correct documentation procedures may result in malpractice lawsuits.

Did you know?

According to the Migraine Research Foundation, migraines are the third most prevalent illness in the world. Women are most affected (18%), followed by children of both sexes (10%), and men (6%).

Did you know?

The highest suicide rate in the United States is among people ages 65 years and older. Almost 15% of people in this age group commit suicide every year.

For a complete list of videos, visit our video library