Hi, can you please answer these Questions :) Thanks! Quantitative Problem: You a

Question

Hi, can you please answer these Questions :) Thanks!

Quantitative Problem: You are given the following information for Wine and Cork Enterprises (WCE):

rRF = 3%; rM = 7%; RPM = 4%, and beta = 1.1

A.) What is WCE's required rate of return? Round your answer to 2 decimal places. Do not round intermediate calculations

B.) If inflation increases by 2% but there is no change in investors' risk aversion, what is WCE's required rate of return now? Round your answer to two decimal places. Do not round intermediate calculations

C.) Assume now that there is no change in inflation, but risk aversion increases by 2%. What is WCE's required rate of return now? Round your answer to two decimal places. Do not round intermediate calculations

D.) If inflation increases by 2% and risk aversion increases by 2%, what is WCE's required rate of return now? Round your answer to two decimal places. Do not round intermediate calculations

Quantitative Problem: You are holding a portfolio with the following investments and betas:

The market's required return is 10% and the risk-free rate is 4%. What is the portfolio's required return? Round your answer to 3 decimal places. Do not round intermediate calculations.
%

Stock Dollar investment Beta A $300,000 1.35 B 150,000 1.6 C 300,000 0.75 D 250,000 -0.3 Total investment 1,000,000

Explanation / Answer

Calculation of portfolio beta:

Portfolio Beta = 795000 / 1000000 = 0.795

Portfolio's required return = Rf +Portfolio Beta x (Rm-Rf)

= 4 + 0.795(10-4)

= 8.77%

Stock Amount (X) Beta (Y) X*Y A 300000 1.35 405000 B 150000 1.60 240000 C 300000 0.75 225000 D 250000 -0.30 -75000 1000000 795000

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