# Dana has a portfolio of 8 securities, each with a market value of \$5,000. The current beta of the portfolio is 1.28 and the beta of the riskiest security is 1.75. Dana wishes to reduce her portfolio beta to 1.15 by selling the riskiest security and replacing it with another security with a lower beta. What must be the beta of the replacement security? a. 1.21 b. 0.91 c. 0.73 d. 1.62

Option c. 0.73

Explanation:

Data provided in the question:

Market value of securities = \$5,000

Current beta of the portfolio = 1.28

Beta of the riskiest security = 1.75

Required beta = 1.15

Now,

let the beta of the other security be 'x'

Portfolio beta = weighted average of individual betas in the portfolio

or

1.28 × 8 × \$5000 = [  x × (8 - 1) × \$5000 ] + [ 1.75 × \$5000  ]

or

\$51,200 = \$35,000x + \$8750

or

\$35,000x = \$42,450

or

x = 1.21

Thus,

If she wishes to reduce the beta to 1.15, by replacing the riskiest security,

let the beta of the replacement security be 'y'

Therefore,

1.15 × 8 × \$5000 = [ 1.21 × (8 - 1 ) × \$5000 ] + [ y × \$5000  ]

or

\$46,000 = \$42,350 + \$5,000y

or

\$5,000y = \$3,650

or

y = 0.73

Hence,

Option c. 0.73

## Related Questions

A rumor of​ "right sizing" at​ Ojai's engineering firm has him and his​ wife, Kaya, concerned about their preparation for meeting financial emergencies. Help them calculate their net worth or complete Worksheet​ 4, and calculate and interpret the current​ ratio, given the following assets and​ liabilities:Checking account ………………… \$2,000Savings account ………………….. \$4,000
Stocks ……………………………. \$8,000
Utility bills ………………………. \$500
Credit card bills …………………. \$1,000
Auto loan ……………………….. \$2,600

Explanation:

Net assets = Total assets - Total debt

We know:

Checking account ………………… \$2,000

Savings account ………………….. \$4,000

Stocks ……………………………. \$8,000

Utility bills ………………………. \$500

Credit card bills …………………. \$1,000

Auto loan ……………………….. \$2,600

Let's classify them as asset or liability:

Assets: Checking account, Stocks, Savings account = 2000+4000+8000=14000

Liability: Utility bills, Credit card bills, Auto loan = 500+1000+2600=4100

So, net worth is 14000-4100=9900

Current ratio = Monetary assets/ Current liabilities;

Monetary assets = 2000+4000 = 6000

Current liabilities = 1000 + 500 = 1500

Current ratio = 6000/1500 = 4

(1) You go to Seven-11 and see the price of a super Slurpee quoted as \$1.39. (2) You buy the super Slurpee and pay with \$1.39 in cash. In the first instance money serves as ___________, while in the second instance money serves as ___________.

In the first instance money serves as Measure of Value, while in the second instance money serves as Medium of Exchange.

Explanation:

The measure of value and medium of exchange are two of the functions of money which are explained as follows:

a) Measure of Value

The function of money as a measure of value permits all goods and services to be attached prices. That is, every commodity is valued in terms of money. Therefore, money gives the opportunity to compare values of goods and services. Measure of value is also referred to as a unit of value.

From the question, the function of money as a measure of value is what permits Seven-11 to quote a super Slurpee as \$1.39.

b) Medium of exchange

The function of money as a medium of exchange provides the opportunity use money as an intermediary instrument in order to ensure goods and services purchased, sold or traded between parties at a standard value. This is different from what obtained under the trade by barter in which commodities had to be exchanged for commodities without any standard value.

From the question, the function of money as a medium of exchange allows an amount of \$1.39 which is a standard value was exchanged for the super Slurpee.

(1) Unit of Account

(2) Medium of Exchange

Explanation:

(1) A unit of account is the measure in which prices are quoted. Thus, when the price of the super Slurpee is quoted in dollars, money functions as a unit of account.

(2) A medium of exchange is what people trade for goods and services. Thus, when you buy the super Slurpee, you are offering the \$1.39 in exchange for the super Slurpee. Money here serves as a medium of exchange.

Which of the following statements is NOT one of the differentiation strategy​ decisions? A. Modular design to aid product differentiation. B. Gather and communicate market research data. C. Use buffer stocks to ensure speedy supply. D. Minimize inventory to avoid product obsolescence.

Answer: Using buffer stocks to ensure speedy supply.

Explanation:

Differentiation is a strategy that is used to differentiate a good or service from other products that are similar which are offered by competitors. It is the development of a good or service, that is unique and stands out for the customers, in terms of features, product design, quality, brand image, or customer service.

Modular design to differentiate a product, collating market research data and minimizing inventory are all product differentiation strategies.

Answer: C. Use buffer stocks to ensure speedy supply.

Explanation: All options except the use of buffer stocks to ensure speedy supply are included in the differentiation strategy decisions. A differentiation strategy is one of the ways a business distinguishes itself from competition and is defined as the approach in development of new products that a firm employs in order to offer unique products that customers will find superior to others in the market. It is important because it allows businesses not just to distinguish themselves from competition, but to also emphasize the unique aspects that make its product superior, accelerating visibility and perceived expertise, that results in better growth and profitability.

2. Jamie Lee and Ross are estimating that they will be putting \$40,000 from their savings account toward a down payment on their home purchase. Using the traditional financial guideline suggestion of "two and a half times your salary plus your down payment," calculate approximately how much Jamie Lee and Ross can spend on a house.3. Using Your Personal Financial Plan Sheet 24, calculate the affordable mortgage amount that would be suggested by a lending institution and based on Jamie Lee and Ross’ income.
How does this amount compare with the traditional financial guideline found in Question #2?
Use the following amounts for Jamie Lee and Ross’ calculations:
• 10% down payment
• 28% for TIPI
• \$500.00 per month for estimated combined property taxes and insurance
• 5% interest rate for 30 years

4. Jamie Lee and Ross found a brand new three-bedroom, 2 ½ bath home in a quiet neighborhood for sale. The listing price is \$275,000. They would like to place a bid of \$260,000 on the home. The seller’s counteroffer was \$273,000. What should Jamie Lee and Ross do next to demonstrate to the owner that they are serious buyers?

5. Jamie Lee and Ross received a signed contract from the buyer accepting their \$273,000 offer! The seller also agreed to pay two points toward Jamie Lee and Ross’ mortgage. Calculate the benefit of having points paid toward the mortgage if Jamie Lee and Ross are putting a \$40,000 down payment on the home.

6.Calculate Jamie Lee and Ross’ mortgage payment, using the 5 percent rate for 30 years on the mortgage balance of \$233,000.

Explanation:

2. Down payment is \$40,000 Two and half times means 5/2 i.e. 5/2*\$40,000 = \$100,000...

5. One mortgage point costs 1% of the mortgage loan amount.

If Jamie Lee and Ross are putting a \$40,000 down payment on a home with an accepted purchase price of \$273,000, then the mortgage loan will be for \$233,000.

\$273,000 - \$40,000 = \$233,000.

Two points paid toward the mortgage will be a cost of \$4,660 to the seller.

\$233,000 x 0.02 = \$4,660.

Typically, purchasing points means that a sum of money has been paid to the lender at closing to reduce the financing cost of the loan. The benefit of purchasing points is that it will secure a lower interest rate for the home buyers. In this sense, points are not put towards the mortgage loan itself, but are used to decrease overall expense to the home buyer over the term of a mortgage. A lower interest rate over the term of a mortgage can account for tens of thousands of dollars of saved interest.

If in this case the seller is simply giving money to the home buyers to put against the mortgage, then \$4,660 will reduce the total loan amount to \$228,340.

Although this question is somewhat ambiguously worded, it is more likely that the points are being purchased to secure a lower interest rate. While this doesn't represent an immediate windfall to the home buyers and does not decrease the mortgage loan amount, it would provide the greatest overall advantage to the home buyers.

I can't do 3,4,6  I'm very sorry about this man. I did my best but they come out wrong and I don't want to misguide you or mislead you in any way....

Very sorry!

For the following:

• 2. Jamie Lee and Ross can afford to spend approximately \$250,000 on a house.
• 3. The affordable mortgage amount for Jamie Lee and Ross is \$233,000.
• 4. Jamie Lee and Ross should make a written offer to the seller, stating their willingness to pay \$260,000 for the home and including a deposit of \$1,000.
• 5. The benefit of having points paid toward the mortgage is that it will lower the interest rate on the loan by 0.25%.
• 6. Jamie Lee and Ross's monthly mortgage payment will be \$1,378.

### How to solve for the financial details?

2. For Jamie Lee and Ross's combined income. Using the traditional financial guideline, they can afford:

Two and a half times Jamie Lee and Ross's salary is \$2.5 × \$100,000 = \$250,000.

Jamie Lee and Ross's down payment is \$40,000.

So, the maximum amount they can afford to spend on a house is \$250,000 + \$40,000 = \$290,000.

3. Using Your Personal Financial Plan Sheet 24, the affordable mortgage amount for Jamie Lee and Ross is:

Monthly debt-to-income ratio (DTI): 28%

Monthly mortgage payment: \$1,800

Monthly property taxes and insurance: \$500

Down payment: 10%

Loan amount: \$233,000

The DTI is calculated by dividing the monthly mortgage payment, property taxes, and insurance by the monthly income. In this case, the DTI is 28%, which is the maximum DTI that most lenders will allow.

The monthly mortgage payment is calculated by multiplying the loan amount by the interest rate and the number of years. In this case, the monthly mortgage payment is \$1,800.

The property taxes and insurance are estimated to be \$500 per month.

The down payment is 10% of the purchase price, or \$23,300.

The loan amount is the purchase price minus the down payment, or \$275,000 - \$23,300 = \$233,000.

4. Jamie Lee and Ross should make a written offer to the seller, stating their willingness to pay \$260,000 for the home. They should also include a deposit of \$1,000 to show that they are serious buyers.

5. The benefit of having points paid toward the mortgage is that it will lower the interest rate on the loan. Two points on a \$233,000 loan is equal to \$4,660. This means that Jamie Lee and Ross's interest rate will be 0.25% lower, which will save them money on their monthly mortgage payments.

6. For Jamie Lee and Ross's monthly mortgage payment:

Principal: \$233,000

Interest rate: 5%

Number of years: 30

Monthly payment: \$1,378

The principal is the amount of money that Jamie Lee and Ross are borrowing from the lender. The interest rate is the percentage of the principal that the lender charges in interest each year. The number of years is the length of the loan. The monthly payment is the amount of money that Jamie Lee and Ross will pay to the lender each month.

Find out more on Financial Plan here: brainly.com/question/30729782

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Retained earnings, December 31, 2019 \$ 347,600 Cost of buildings purchased during 2020 46,600 Net income for the year ended December 31, 2020 56,100 Dividends declared and paid in 2020 32,200 Increase in cash balance from January 1, 2020, to December 31, 2020 24,000 Increase in long-term debt in 2020 44,100 Required: From the above data, calculate the Retained Earnings balance as of December 31, 2020:

\$371,500

Explanation:

The retained earnings account represents the cumulative net income of an entity over the years after considering the dividend paid over the periods of existence.

The movement in the dividend account at the start and end of a given period is as

Opening balance + Net income - dividend declared and paid = closing balance. Hence , the Retained Earnings balance as of December 31, 2020

= \$347,600 + \$56,100 - \$32,200

= \$371,500

cool

Explanation:

The term __________ refers to the supplemental information provided in a proposal. It often includes examples of past projects, client testimonials, and technical specifications.A. overview
B. references
C. executive summary
D. appendices

D. appendices

Explanation:

The term appendices refers to the supplemental information provided in a proposal. It often includes examples of past projects, client testimonials, and technical specifications. Appendices basically provide the readers with the additional information which help them in better understanding the proposal in a greater detail. It is combination of additional and supplementary materials which includes the results of the past projects, testimonials, supportive data  and other technical specification of the project, which can't be included in the main body of the proposal.