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The observed bid and ask of stock XYZ are 15.57 and 15.71, respectively. XYZ has an estimated annualized return volatility of 25%. Assume σspread=0.005 and 250 trading days in one year. a. Estimate the 1-day, 95% VaR of a 5,000 share position in stock XYZ. b. Estimate the 1-day 95% LVaR of the position, using the constant spread approach. c. Estimate the LVaR to VaR ratio using the exogenous spread approach. d. Suppose the position represents 10% of the size of the market and price elasticity of demand for stock XYZ is -0.6. Calculate the LVaR to VaR ratio using the endogenous price approach. e. Calculate the combined LVaR to VaR ratio incorporating both exogenous and endogenous effects.
XYZ company has no debt and the cost of equity is 15%. The current value of the firm is $1,000,000 and XYZ can borrow 10%. Assume XYZ pays no tax. Compute the firm value if XYZ borrows $200,000 and uses the proceeds to repurchase shares. Calculate fi..
Which rate of return does the investor expect to receive on this stock if the stock is purchased today?
Why are equity earnings usually greater than cash flow generated from the investment? How can these equity earnings distort profitability analysis?
What happens is that a company experiences a stock price decrease, which leaves employee stock options farout of the money or underwater and what are the implications for employee stock options? In light of your answer, can yourecommend an improvem..
Assuming that the stock market is efficient, is each of the following statements true or false (to receive full credit, you must explain why in two or three sentences or with an example)? The stock price of Company X doubled over the past year, the s..
Calculating Projected Net Income. A proposed new investment has projected sales of $825,000. Variable costs are 55% of sales, and fixed costs are $187,150; depreciation is $91,000. Prepare a pro forma income Statement assuming a tax rate of 35%. What..
April wants to create a scholarship fund by making annual savings donations to the fund for several years before the fund starts making annual scholarship payments forever. She plans to save 12,700 dollars per year in the trust fund for 3 years. Her ..
Storico Co. just paid a dividend of $2.00 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent divid..
Based on the period 1926-2011, what rate of return should you expect to earn over the long-term if you are unwilling to bear risk?
The Garden Shoppe has adopted a policy of increasing the annual dividend on its common stock at a constant rate of 1.65 percent annually.- What will the dividend be eight years from now?
Carlos Ramirez and Camila Garza organized New World Book Store as a corporation; each contributed $70,900 cash to start the business and received 5,200 shares of common stock. What was the amount of net income for the year? (Hint: Use the retained ea..
Volbeat Corp. shows the following information on its 2015 income statement: sales = $403,000; costs = $305,000; other expenses = $7,900; depreciation expense = $18,200; What is the 2015 operating cash flow? What is the 2015 cash flow to stockholder..
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