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During the year ended 2014, the current BOJ 90-day Treasury bill rate stood at 4.5%. Hence, most investors believe that to optimize portfolios, an ideal combination of both stocks and bonds should be held. Hence, Jonny Cash has a two stock portfolio that is equally weighted comprising stock A and B. While, Mr Smart has another portfolio with stock X and Y which are weighted 60% and 40% respectively. Below are the returns of the stocks in both portfolios: Stock A Stock B Stock X Stock Y January 12% 10% 16% -6% February -5% 2% 4% 10% March 8% 3% 4% 2% Required: e. Calculate the covariance between Stock X and Y [ 6 marks] f. Calculate the correlation coefficient for each portfolios [ 4 marks] g. Calculate the standard deviation of Mr Smart’s and Mr Cash’s portfolio[10 marks] h. Which portfolio is more efficient? Note: show the necessary calculations to corroborate your answer.
A company’s financial statements consist of the balance sheet, income statement, and statement of cash flows. Describe what each statement tells us and their limitations. What is the purpose and importance of financial analysis?
Discuss the appropriate discount rate for valuing bond. Discuss and elaborate the decision of investing in bond market based on the forecast of interest rate.
Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 9%, and all stocks have independent firm-specific components with a standard deviation of 49%. What is the expected return–beta relationship in this economy?
Cash flows from operating activities might include:
What are capital expenditures, and how can they help a company achieve its long-term objectives?
Lakonishok Equipment has an investment opportunity in Europe. The project costs €12 million and is expected to produce cash flows of €1.8 million in Year 1, €2.6 million in Year 2, and €3.5 million in Year 3. The current spot exchange rate is $1.36/€..
An investor bought a racehorse for $1 million. The horse's average winnings were $700,000 per year and expenses averaged $200,000 per year. The horse was retired after 3 years, at which time it was sold to a breeder for $175,000. Assuming MACRS depre..
You have just purchased a new warehouse. To finance the purchase, you've arranged for a 25-year mortgage for 80 percent of the $1,800,000 purchase price. The monthly payment on this loan will be $10,800. What is the APR?
At the beginning of the month, you owned $5,000 of General Dynamics, $4,000 of Starbucks, and $7,000 of Nike. The monthly returns for General Dynamics, Starbucks, and Nike were 7.50 percent, −1.66 percent, and −0.69 percent. What is your portfolio re..
Volbeat Corporation has bonds on the market with 16.5 years to maturity, a YTM of 10.6 percent, and a current price of $942. The bonds make semi annual payments. What must the coupon rate be on the bonds?
Bonds mature in 13 years. The bonds have a face value of $1,000 and an 9% coupon rate, paid semi-annually. The price of the bonds is $1,150. Bonds are callable in five years at a price of $1,050. Need YTM and YTC
You have $51,501.70 in a brokerage account, and you plan to deposit an additional $7,500 at the end of every future year until your account totals $425,000. You expect to earn 8.4% annually on the account. How many years will it take to reach your go..
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