PM and Equity

Question 1

CML Slope

Answer 1

Sharpe Ratio of Market Portfolio

=MRP/StDev

Question 2

Margin Call: Amt of equity in margin account

Price = 39, initial = 55%, maintenance = 35%

Answer 2

-Call if equity in account falls below maintenance margin
-Margin Loan = 39*(1-.55) = 17.55
-Margin Call Price: (x - 17.55)/x = .35
Margin Loan/(1 - .35) = 27

Question 3

Justified PE ratio

Answer 3

= Payout rt / (k - g)

Question 4

Est. Price using Justified PE

Answer 4

= JPE x (EPS x (1 + g)