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

Question 22

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Consider the following data:
 ABC  XYZ Market  Price $20$50 Dividend $0.40$26% Beta 1.51.01.0 Alpha 1.0%2.0%\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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