QUESTION An investor buys a stock for $36. At the same time a six-month put option to sell the stock for $35 is selling for $2. a) What is the profit or loss from purchasing the stock if the price of the stock is $30, $35, or $40? b) If the investor also purchases the […]
Date: September 2nd, 2020
QUESTION Consider the following year-end prices of a hypothetical market index:YearPrice200410020051102006104.52007106.592008106.592009110.852010108.63(a) Compute the expected (annual) return of the market index as the arithmetic average of the annual returns of the market index.Assume that the risk-free rate equals 0.75% and use the above market index as the Market Portfolio.(b) Assuming that the CAPM holds, what is […]
Date: September 2nd, 2020
QUESTION Define each of the following terms IN YOUR OWN WORDS: a. Agent; principal; agency relationship b. Agency cost c. Basic types of agency conflicts d. Managerial entrenchment; nonpecuniary benefits e. Greenmail; poison pills; restricted voting rights f. Stock option; ESOP a) Agent; principal; agency relationship When any person or an entity acts on behalf […]
Date: September 2nd, 2020
QUESTION A lottery sells 1 million tickets.One of those tickets wins the grand prize of $1 million, 100 tickets win 1st place prizes of $10,000, and 10,000 tickets win prizes of $1.(a) What is the expected value of winnings from a single lottery ticket?(b) What is the variance of the winnings from a single lottery […]
Date: September 2nd, 2020
QUESTION It is a common saying that the only thing certain about a forecast is that it will be wrong. What is meant by this Forecasting is required in mostly all domains or units of a business. Since forecasting is based on assumptions about the market. It might get right if assumptions are good enough […]
Date: September 2nd, 2020
QUESTION Using ROI, RI, and EVA to evaluate investment centers San Diego Paints is a national paint manufacturer and retailer. The company is segmented into five divisions: Paint stores (branded retail locations), Consumer (paint sold through stores like Sears and Lowes), Automotive (sales to auto manufacturers), International, and Administration. The following is selected divisional information […]
Date: September 2nd, 2020
QUESTION What are the differences between futures and forward markets? What are the pros and cons associated with using each one? Difference between futures and forward markets: a. Futures contracts are standardized. Forward contracts are customized. b. Parties in a futures contract hold formal contracts with the futures exchange. Parties to a forward contract hold […]
Date: September 2nd, 2020
QUESTION Which is not one of the potential advantages of decentralization? a. Improves motivation and retention b. Supports use of expert knowledge c. Improves customer relations d. Increases goal congruence d. Increases goal congruence Decentralization refers to the delegation of authority at all levels of organization. The decentralization in the organization is likely to improve […]
Date: September 2nd, 2020
QUESTION Rachel and Mary both have decided to buy 100 shares of WWW.COM, a hot Internet stock. The market price is $240 per share when Rachel places a market order and Mary places a limit order at $230 per share. One week later, the price of WWW.COM is $305 per share after having increased. How […]
Date: September 2nd, 2020
QUESTION Calculate labor variances Johnson, Inc., manufactures lead crystal glasses. The standard direct labor time is 0.3 hour per glass, at a price of $13 per hour. The actual results for the production of 6,900 glasses were 0.2 hour per glass, at a price of $10 per hour. Requirement 1. Calculate the labor price variance […]
Date: September 2nd, 2020
