Finance Capital Structure (3 Questions), business and finance homework help


1. Suppose Intel has an expected return of 1% and a standard deviation of 40%. Twitter
has an expected return of 18% and standard deviation of 60%. The correlation between Intel
and Twitter is 0.5. What is the standard deviation of a portfolio invested 40% in Intel and
60% in Twitter?2. XYZ Corp. plans to issue equity and wants to sell it at the highest price possible. There
are only two potential buyers, investors A and B. Investor A is well diversified (she has
hundreds of different stocks in her portfolio) while investor B is undiversified (the only stock
in her portfolio would be XYZ). Which investor is willing to pay a higher price for XYZ
stock? Why?3. Company A has an expected return of 8% and a standard deviation of 40%. Company
B has an expected return of 23% and standard deviation of 80%. The correlation between
A and B is 0.3. What is the expected return and standard deviation of a portfolio invested
75% in Company A and 25% in Company B?

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