Consider the Following Data The Riskless Rate Is 10%,and the Expected Return on the

question 13

Essay

Consider the following data:
$\begin{array}{lccc}&\underline{\text { ABC }} & \underline{\text { XYZ}}&\underline{\text { Market }}\\\text { Price } & \$ 20 & \$ 50 & - \\\text { Dividend } & \$ 0.40 & \$ 2 & 6 \% \\\text { Beta } & 1.5 & 1.0 & 1.0 \\\text { Alpha } & -1.0 \% & 2.0 \% & -\end{array}$ The riskless rate is 10%,and the expected return on the market is 20%.Your portfolio consists of 50,000 shares of ABC and 10,000 shares of XYZ.
a. Give the values of the following statistics for your portfolio: dividend yield; expected prices for ABC and XYZ in one year; beta; and alpha.
b. Suppose you are in the 40% effective marginal tax bracket and you plan to hold your portfolio more than one year. What is the expected after-tax return on your portfolio? What is the expected after-tax return on the market portfolio?

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Definitions:

Polluters

Entities, often companies or individuals, that release pollutants into the environment, causing harm or potential harm.

External Benefits

Benefits of a good or service that are enjoyed by people other than the ones who originally purchase or consume the good.

Marginal Social Cost

The complete expense incurred by society to produce an extra unit of a product, incorporating both individual costs and external effects.

Marginal Social Benefit

The additional benefit to society as a whole from producing one extra unit of a good or service.