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Consider the following information about three stocks: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom .20 .34 .46 .50 Normal .40 .25 .23 .20 Bust .40 .03 −.25 −.42 If your portfolio is invested 35 percent each in A and B and 30 percent in C, what is the portfolio expected return? What is the variance? What is the standard deviation? If the expected T-bill rate is 4.50 percent, what is the expected risk premium on the portfolio? If the expected inflation rate is 4.00 percent, what are the approximate and exact expected real returns on the portfolio? What are the approximate and exact expected real risk premiums on the portfolio?
Calculates a quarterly and annualized return on the portfolio, and the expected return for the portfolio (students may use the closing prices as of December 31st of last year).
Change in net working capital should always be positive. Free cash flow can never be negative. A negative cash flow to creditors indicates you must have paid off debt during the period. A negative cash flow to shareholders indicates you must have iss..
Mary works as a full-service broker at a firm that charges $75 a trade plus 10 cents per share for the broker's services. Calculate her commission on the sale of 700 shares of stock at $26 per share.
Discuss the problems involved in using the cost-of-carry model for pricing commodity futures? In particular, discuss why cash-futures basis is so variable for oil futures contracts, and its relevance for hedging programs in the oil market.
A convertible bond is selling for $900. It has 10 years to maturity, a $1000 face value, and a 10% coupon paid semi-annually. Similar non convertible bonds are priced to yield 12%. The conversion ration is 40. The stock currently sells for $21.75 per..
Calculate the expected return over the 4-year period for each of the three alternatives. Calculate the standard deviation of returns over the 4-year period for each of the three alternatives. Use your findings in parts a and b to calculate the coeffi..
The lack of historical data makes it difficult to create a forecast and budget for a new company. Class, how many years of historical sales data do you think are necessary in order to create an accurate forecast of sales? Explain.
In the Industrial Supply Company example (Table 4.4) it was assumed that the company’s fixed assets were being used at nearly full capacity and that net fixed assets would have to increase proportionately as sales increased.
Identify and describe appropriate costing techniques for specific engineering business functions. ACE Engineering Limited manufactures high quality electric drills for use in the medical industry. The financial director is considering next year's pro..
Schweser Satellites Inc. produces satellite earth stations that sell for $100,000 each. The firm’s fixed costs, F, are $2 million, 50 earth stations are produced and sold each year, profits total $500,000, and the firm’s assets (all equity financed) ..
Bob is considering acquiring a commercial property for $100,000. He expects the property will generate NOIs of $10,000 in year 1, $11,000 in year 2, $12,000 in year 3 and $12,500 in year 4. He wants you to do a three-year cash flow simulation. At the..
You purchased one EAW, Inc. 6 percent coupon bond one year ago for $1,020. The bond makes annual payments and matures four years from now. You sell the bond today when the required return is 5 percent. The inflation rate was 2.8 percent over the past..
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