Calculate the variance on a portfolio

Assignment Help Finance Basics
Reference no: EM13847567

QUESTION 1

ExxonMobil (NYSE: XOM) is currently trading at $20.75 on the NYSE. ExxonMobil is also listed on NASDAQ and assume it is currently trading on NASDAQ at $20.50.

QUESTION: Does an arbitrage opportunity exist and if so how would you exploit it and how much would you make on a block trade of 1,000 shares?

 QUESTION 2

SmithBuilt Corp. (SMI) is expected to have a 25 percent growth rate for the next four years (affecting D1, D2, D3, and D4). Beginning in year five, the growth rate is expected to drop to 7 percent per year and last indefinitely.

QUESTION: If SMI just paid a $2.00 dividend and the appropriate discount rate is 15 percent, then what is the value of a share of SMI?

 QUESTION 3

Consider two mutually exclusive projects with the following cash flows:

Project

C/F0

C/F1

C/F2

C/F3

C/F4

C/F5

C/F6

TRO

$(41,215)

$12,500

$14,000

$16,500

$18,000

20,000

N/A

XYZ

$(46,775)

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

QUESTION: If the discount rate for project XYZ is 15%, then what is the NPV for project XYZ?

 QUESTION 4

Consider the following realized annual returns:

Year End

Market Realized Return

Microsoft Realized Return

1996

21.2%

88.3%

1997

30.3%

56.4%

1998

22.3%

114.6%

1999

25.3%

68.4%

2000

-11.0%

-62.8%

2001

-11.3%

52.7%

2002

-20.8%

-22.0%

2003

33.1%

6.9%

2004

13.0%

9.2%

2005

7.3%

-0.9%

QUESTION: Using the data provided in the table, calculate the average annual return, the variance of the annual returns, and the standard deviation of the average returns for the market from 1996 to 2005.

QUESTION 5

Consider the following returns:

Year End

Asus Realized Return

Dell  Realized Return

Oracle

 Realized Return

2000

20.1%

-14.6%

0.2%

2001

72.7%

4.3%

-3.2%

2002

-25.7%

-58.1%

-27.0%

2003

56.9%

71.1%

27.9%

2004

6.7%

17.3%

-5.1%

2005

17.9%

0.9%

-11.3%

QUESTION: Calculate the variance on a portfolio that is made up of equal investments in Dell's and Oracle's stock.

 QUESTION 6

The Momentus Corporation is considering launching a new product and is trying to determine an appropriate discount rate for evaluating this new product. Momentus has identified the following information for three single division firms that offer products similar to the one Momentus is interested in launching:

Comparable Firm

Equity Cost of Capital

Debt Cost of Capital

Debt-to-Value Ratio

Techtron Corp.

12.50%

6.50%

50%

Xenon Inc.

13%

6.10%

40%

Flatiron Ltd.

14%

7.10%

60%

QUESTION: Based upon the three comparable firms, calculate the most appropriate unlevered cost of capital for Momentus to use on this new product.

QUESTION 7

Consider a project with free cash flows in one year of $90,000 in a weak economy or $117,000 in a strong economy, with each outcome being equally likely. The initial investment required for the project is $80,000, and the project's cost of capital is 15%. The risk-free interest rate is 5%.

Bancorp Inc. has no debt, a total equity capitalization of $50 billion, and a beta of 2.0. Included in Bancorp's assets are $12 billion in cash and risk-free securities.

QUESTION: Calculate Bancorp Inc.'s value and unlevered beta considering the fact that Bancorp's cash is risk-free.

Reference no: EM13847567

The sanchez corporation is preparing its 2012 balance sheet

The Sanchez Corporation is preparing its 2012 balance sheet. The company records show the following selected amounts at the end of the accounting period, December 31, 2012:

Reading publically available financial statements

Why is working capital important to management? How do financial analysts use the quick ratio? Would your computations be different if the company reported $250,000 worth of c

What are examples of opportunity costs

What is the difference between NPV,IRR, Payback analysis and how are these methods related. What are examples of opportunity costs and incremental cash flows. How does the cas

Identification of any controls used in the labor markets

Before starting to write your paper, you must get an outline approved by your instructor. You will find a dropbox for submission of this outline. Your outline must include

What correlation levels between the two assets

a. Suppose we have two assets, A and B. What correlation levels between the two assets will yield diversification benefits in terms of portfolio risk reduction?b. At what corr

The common stock of perforated pools liners,

The common stock of Perforated Pools Liners, Inc.(PPL) now sells for $54.00 per share. The table below shows the anticipated stock price and dividend to be paid one year from

Evaluate this capital investment project

Healthcare Finance What types of decisions would need to be made before the investment is made? Indicate the main kinds of information/data needed to evaluate this capital inv

How many years will it take $2 million to grow

How many years will it take $2 million to grow to $7.00 million with an annual interest rate of 8 percent? What annual rate of return is earned on a $5,000 investment when it

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd