1. A fund manager is holding the following stocks:StockAmount InvestedBeta1$300 million1.22560 million1.43320 million0.74230 million1.8The risk-free rate is 5 percent and the market risk premium is also 5 percent. If the manager sells half of her investment in Stock 2 ($280 million) and puts the money in Stock 4, by how many percentage points will her portfolio’s required return increase? Group of answer choices2.00%0.4%0.2%0.22% 2. AlphaGet is currently assessing the value of its securities and have obtained the following information that should provide AlphaGet with the necessary information to estimate the value of its securities:Current long-term government securities carry a yield of 6.5% which includes an inflation premium of 1.25%Based on the credit rating of AlphaGet of BAA, the estimated credit spread of AlphaGet is at 2.5%Utilizing the work of an external expert, beta of AlphaGet is estimated at +1.5 for marginal investorsDiversified investors in the market is currently demanding a 2.0% premium over government securitiesThe following are the current instruments issued by AlphaGet:Bond A carries a 5-year tenor and will mature in 3 years with a face value of Php250,000 carrying a coupon of 9.0%Bond B carries a 10-year tenor and will mature in 5 years with a face value of Php500,000 carrying a coupon of 8.5%Bond C carries a 5-year tenor and was just recently issued with a face value of Php500,000 carrying a coupon of 10.0%AlphaGet had historically paid dividends out at a rate of 10% of its net income. Dividends paid out this year amounted to Php120.00 per share and is expected to grow by 5% per year over the next 5 years before stabilizing at 3.5% perpetually after year five.What is the value of Bond A for AlphaGet? Clue - correct answer should have a string of number "25" appearing in sequence in any unit until two decimal points.

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Answered: A fund manager is holding the following…

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter5: Probability: An Introduction To Modeling Uncertainty

Section: Chapter Questions

Problem 30P: Suppose that the return for a particular large-cap stock fund is normally distributed with a mean of...

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1. A fund manager is holding the following stocks:

Stock	Amount Invested	Beta
1	$300 million	1.2
2	560 million	1.4
3	320 million	0.7
4	230 million	1.8

The risk-free rate is 5 percent and the market risk premium is also 5 percent. If the manager sells half of her investment in Stock 2 ($280 million) and puts the money in Stock 4, by how many percentage points will her portfolio’s required return increase?

Group of answer choices

2.00%

0.4%

0.2%

0.22%

2. AlphaGet is currently assessing the value of its securities and have obtained the following information that should provide AlphaGet with the necessary information to estimate the value of its securities:

Current long-term government securities carry a yield of 6.5% which includes an inflation premium of 1.25%
Based on the credit rating of AlphaGet of BAA, the estimated credit spread of AlphaGet is at 2.5%
Utilizing the work of an external expert, beta of AlphaGet is estimated at +1.5 for marginal investors
Diversified investors in the market is currently demanding a 2.0% premium over government securities

The following are the current instruments issued by AlphaGet:

Bond A carries a 5-year tenor and will mature in 3 years with a face value of Php250,000 carrying a coupon of 9.0%
Bond B carries a 10-year tenor and will mature in 5 years with a face value of Php500,000 carrying a coupon of 8.5%
Bond C carries a 5-year tenor and was just recently issued with a face value of Php500,000 carrying a coupon of 10.0%

AlphaGet had historically paid dividends out at a rate of 10% of its net income. Dividends paid out this year amounted to Php120.00 per share and is expected to grow by 5% per year over the next 5 years before stabilizing at 3.5% perpetually after year five.

What is the value of Bond A for AlphaGet? Clue - correct answer should have a string of number "25" appearing in sequence in any unit until two decimal points.

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