QUESTION Return data on three assets A, B, and C.EXPECTEDRETURN Investment Alterna Alternative 1: Year Return 2007 16 2008 17 2009 18 2010 19 Average return = (16 17 18 19) / 4 = 17.5 Variance of returns = (16 17.5)^2 (17 17.5)^2 (18 17.5)^2 (19 17.5)^2 = 5 Std dev of returns = sqrt(5) […]
Date: September 2nd, 2020
QUESTION The Bailey Brothers want to issue 20-year, zero coupon bonds thatyield 9 percent. What price should it charge for these bonds if theface value is $1,000? a. $157.25 b. $163.70 c. $171.93 d. $194.49 e. $202.64A bond yielded a real rate of return of 4.79 percentfor a time period when the inflation rat Number […]
Date: September 2nd, 2020
QUESTION Consider the following information and then calculate the requiredrate of return for the SI Fund. The total investment in the fund is$2,000,000. The market rate of return is 15% and the risk free rateis 7%.StockInvestmentBetaA$200,0001.50B$300,000-0.50C$500,0001.25D$1,000,0000.75 Amount Invested Beta Percent Invested 200,000 1.50 10% 300,000 -0.50 15% 500,000 1.25 25% 1,000,000 0.75 50% p = […]
Date: September 2nd, 2020
QUESTION Which fluctuate more, long-term or short-term interest rates?Why?(Points: 4) imum impact is felt on the short term rates. On the other hand, long term interest rates do not change frequently on year to year expectations. Also, the short term rates are determined by inter-bank transactions done overnight. Since bank requirements fluctuate widely, so does […]
Date: September 2nd, 2020
QUESTION Assumethat you have been hired as a consultant by CGT, a major producerof chemicals and plastics, including plastic grocery bags,styrofoam cups, and fertilizers, to estimate the firms weightedaverage cost of capital. The balance sheet and some otherinformation are provided below.AssetsCurrent Calculating Cost of Equity(R E ): Based on the CAPM, Cost of Equity (R […]
Date: September 2nd, 2020
QUESTION x.i5MGT201 FINANCIAL MANAGEMENTSPRING 2009 om;> (1) Calculating Pay-back Period: Machine X Year Cash flows Net Cashflows 0 -700,000 -700,000 1 130,000 -570,000 2 180,000 -390,000 3 170,000 -220,000 4 165,000 -55,000 5 450,000 Payback Period = [Last year with a negative NCF ] Absolute value of NCF in that year / Total cash flow […]
Date: September 2nd, 2020
QUESTION Maximization of shareholder wealth as a goal is superior toprofit maximization because:a. it considers the time value of the moneyb. it considers the time value of money and factors inuncertaintyc. it ensures high stock pricesd. it considers social benefits Answer: b. it considers the time value of money and factors inuncertainty. Explanation: When shareholders […]
Date: September 2nd, 2020
QUESTION x. Question 1: Which method of portfolio selection, Toms “RandomWalk”or Johns Fundamentalist approach is better? Which requiresmore effort? Are expected rewards different? It depends on the number of stocks in the portfolio and theresulting “w” or weight that the candidate stock will have in thenew portfolio. For small portfolios, Johns Fundamentalistapproach is better than […]
Date: September 2nd, 2020
QUESTION You wish to purchase a20-year, $1,000 face value bond that makes semiannual interestpayments of $40. If you require a 10% nominal yield tomaturity, what price should you be willing to pay for thebond? (Points: 4) $619 $674 Face Value (or) Par Value of the Bond = $1,000 Semi Annual InterestPayments = $40 Yield to […]
Date: September 2nd, 2020
QUESTION financial planning problemDetermining the future value of education. Jenny estimatesthat as a result of completing her masters degree, she will earn$6,000 a year for the next 40 years.What would be the future value of these additional earningsbased on an annual interest rate of 6% Annual Interest rate 6% Annual earnings $6,000 Number of years […]
Date: September 2nd, 2020
