Author Question: Akai has a portfolio of three assets. Find the expected rate of return for the portfolio assuming he ... (Read 159 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?

For about 100 years, scientists thought that peptic ulcers were caused by stress, spicy food, and alcohol. Later, researchers added stomach acid to the list of causes and began treating ulcers with antacids. Now it is known that peptic ulcers are predominantly caused by Helicobacter pylori, a spiral-shaped bacterium that normally exist in the stomach.

Did you know?

If you could remove all of your skin, it would weigh up to 5 pounds.

Did you know?

Pope Sylvester II tried to introduce Arabic numbers into Europe between the years 999 and 1003, but their use did not catch on for a few more centuries, and Roman numerals continued to be the primary number system.

Did you know?

Multiple sclerosis is a condition wherein the body's nervous system is weakened by an autoimmune reaction that attacks the myelin sheaths of neurons.

Did you know?

Many supplement containers do not even contain what their labels say. There are many documented reports of products containing much less, or more, that what is listed on their labels. They may also contain undisclosed prescription drugs and even contaminants.

For a complete list of videos, visit our video library