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Yahoo today=50 Tomorrow: Good =75 Tomorrow: Bad Price=50
Price Shell today=25 Tomorrow: Good 20 Tomorrow: Bad Price=30
Price Treasury today=100 Tomorrow: Good 105 Tomorrow: Bad Price=105
b. Assume your utility has the form U: E(r) - ½(A)σ 2 ; at what level of risk aversion would be indifferent between holding Yahoo or Treasury notes?
c. Suppose your risk aversion equals 4, you form a portfolio of 30% Yahoo and 70% Treasury notes, is this portfolio optimal?
Recently, Jamie and Jake each bought new cars. Both received a loan from a local bank with a nominal interest rate of 12% where payments are made at the end of each month, and they both pay the same monthly payment. Jamie's loan is for $15,000; howev..
Joe investor has noted that the current price of MG Company is 61.50 and that its current P/E ratio is 15 and its current payout ratio for dividends is 40%. Based on his analysis of the next three years, Joe anticipates the dividiend annual compound ..
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Using the historical data as a guide construct a pro forma ( forecasted) profit and loss statement for the clinic's average day for all of 2013 assuming the status quo. With no change in volume (utilization), is the clinic projected to make profit?
Steele Insulators is analyzing a new type of insulation for interior walls. Management has compiled the following information to determine whether or not this new insulation should be manufactured.
Why does a bankrupt firm under Chapter 11 generally require its bondholders to convert their debt to equity of the company after the reorganization?
Joe’s starting salary as a mechanical engineer is around $60,000. Joe is planning to place a total of 10% of his salary each year in the mutual fund. Joe expects a 5% salary increase each year for the next 30 years of employment. If the mutual fund w..
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 8% coupon rate paid semi annually, and are callable in 5 years at $1050. They currently sell at a price of $1,100. What is the yield to call? What is the yield to maturity?
Calculate Laurel’s portfolio beta for last year and for this year. Assume that the changes in investment (value) come from changing stock prices rather than buying and selling shares. What has happened to the riskiness of Laurel’s portfolio? Should s..
John has some extra cash today in the amount of $240 and places the money in the bank for 9 years. John expects to have extra cash one-year from today in the amount of $590, and will leave this second amount in the bank for 8 years. All savings earn ..
What are the economic functions that financial intermediaries perform that benefit society? In your answer, discuss the relationship of financial intermediaries and financial markets to the savings-investment process within an economy and to each oth..
As a jewelry store manager, you want to offer credit sales to your customers, with interest on outstanding balances paid monthly. However, to finance your working capital, you must borrow funds from your bank at a nominal 6%, monthly compounding.
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