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covariance of return

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A project has an expected cash flow of $300 in year 3. The risk free interest rate is 5%. The market risk premium is 8%. The projects Beta is 1.25. Calculate the certaintly equivalent cash flow for year 3.

you invest equal amounts in a portfolio with an expected return of 16% and a standard deviation of returns of 20% and a risk free asset with an interest rate of 4%. Calculate the standard deviation of the returns on the resulting portfolio.

stock P and Q have annual returns of -10%, 12%, 28% and 8%, 13%, 24% respectively. Calculate the covariance of return between the securities.

A company has paid a dividend of $2 per share out of earnings of $4 per share. If the book value per share is $25 and it is currently selling for $40 per share, calculate the required rate of return on the stock.

If the present value of $1 received n years from today at an interest rate r is 0.621, then what is the future value of $1 invested today at an interest rate of r% for n years.

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Solution Summary

Calculate the covariance of return between the securities in this posting.

Solution provided by:
Jayant Kumar, MBA
Education
  • MBA, Indian Institute of Finance
  • Bsc, Madras University
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