I have 9 variables, 5 with values, i have to figure out the others.....i'm stuck. I thik i just need one to get me going but can't figure out how to get it. The second letter is the sub letter. Any ideas?
Re=
Be=1.5
Rf=10%
Rd=12%
Bd=
Rm=18%
Ra=
Ba=
D/V=.5
spell out the abbreviations and ill help you...
Ra=expected rate of return on a portfolio of all teh firms securities
Rd=expected return on debt
Re=Expected retrun on equity
Be=Beta Equity
Rf=??
Bd=Debt beta
Rm=??
Ba=beta portfolio
D/V debt to value ratio
ok dude... im about to commute home... come back around 5:45 and ill have all the answers for you...
If it wasn't my last question and due at 5:30 i would lol. Thanks anyways though. I got most of the other questions right so it's not a huge deal i guess.
too late, but...
Re = Rf + Be * (Rm - Rf) => 10%+1.5*(18%-10%)=22%
Ra = Rd * (D/V) + Re * (1 - D/V) => 12%*.5+22%*.5=17%
Bd = (Rd - Rf) / (Rm - Rf) => (12%-10%) / (18%-10%) = .25
Ba = Bd * (D/V) + Be (1-D/V) = (.25*.5)+(1.5*.5) = .875