Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. please answer each part fully with formulas and ex

Please answer each part fully with formulas and explanations. with steps. You have collected...

50.1K

Verified Solution

Question

Finance

Please answer each part fully with formulas and explanations. with steps.

You have collected returns on AnaDone Corporation (AD Corp.), a large, diversified manufacturing firm, and the NYSE index for five years:

Year AD Corp. NYSE

1981 10% 5%
1982 5% 15%
1983 -5% 8%
1984 20% 12%
1985 -5% -5%

a. Estimate the intercept (alpha) and slope (beta) of the regression.

b. If you bought stock in AD Corp. today, how much would you expect to make as a return over the next year? (The six-month T-bill rate is 6%.)

c. Looking back over the past five years, how would you evaluate AD Corp.'s performance relative to the market?

d. Assume now that you are an undiversified investor and that you have all of your money invested in AD Corp. What would be a good measure of the risk that you are taking on? How much of this risk would you be able to eliminate if you diversify?

e. AD Corp. is planning to sell off one of its divisions. The division under consideration has assets that comprise half of the book value of AD Corp. and 20% of the market value. Its beta is twice the average beta for AD Corp. (before di-vestment). What will the beta of AD Corp. be after divesting this division?

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Physics
1.2K views

Which of the following statements is false 1 The energy of red photon is more...

Basic Math
1.2K views

Find the general solution of the given system X t X 2 4 7 X

Economics
1.2K views

1.) You are the CEO of a bank. Back in November, you were able to foresee the...

Basic Math
1.2K views

For each function below identify the Slope and Vertical Intercept Write your numerical answers as...

Basic Math
1.2K views

A random sample of 28 professionals in a large city were surveyed about the length...

Algebra
1.2K views

Find the area of the circle if the circumference is 6? inches.(A) 9? ln.^2(B) 6?...

Algebra
1.2K views

Simplify the expression 8y9 2 92

Accounting
1.2K views

5. Critics have claimed that a widely used accounting system has led to undesirable buildups...

Accounting
1.2K views

Your main responsibility on the work term placement from your robotics program in college is...

Accounting
1.2K views

Presented below is information related to equipment owned by Skysong Company at December 31, 2025....

Accounting
1.2K views

Managerial Accounting: 58. At the end of a five-year life, a company will dispose of...

Accounting
1.2K views

Whispering Co. sells $528,000 of 10% bonds on March 1, 2017. The bonds pay interest...