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A large all equity pension fund company with AUM of $500 Billion that closely following S&P 500 index is facing a possibility of new regulatory changes in its management of market risk. The new regulation would require capital charges to cover possible tail event losses based on the realistic assessment of market risk of the company. A CRO (Chief Risk Officer) of the fund is given a task to assess a range of possible costs with regards to such charges. The CRO turns to you for your recommendations. In your recommendations, you need to consider the following:
- access the daily price data online for the S&P 500 index (from Jan 1, 2005 to Dec 31, 2014)
- various choices of risk measures
- specificity of the data in terms of its distribution and volatility structure
- tradeoffs between profitability and risk of the implemented charges
- possible adjustments in portfolio strategy
- supporting your answers with graphs / tables
The Absolute Zero Co. just issued a dividend of $2.95 per share on its common stock. The company is expected to maintain a constant 6.1 percent growth rate in its dividends indefinitely. If the stock sells for $59 a share, what is the company’s cost ..
Considerr the following information on Stocks I and II: Rate of Return If State Occurs Probability of State of Economy State of Economy Stock I Stock II Recession .40 .03 -.18 Normal .25 .34 .14 Irrational exuberance .35 .28 .44 The market risk premi..
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ennedy Air Services is now in the final year of a project. The equipment originally cost $35 million, of which 90% has been depreciated. Kennedy can sell the used equipment today for $8.75 million, and its tax rate is 40%. What is the equipment's aft..
List the advantages and disadvantages of the payback method, internal rate of return, and net present value. Provide an example of how/why someone may use different methods.
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Merriwether Building has operating income of $20 million, a tax rate of 40%, and no debt. It pays out all of its net income as dividends and has a zero growth rate. The current stock price is $40 per share, and it has 2.5 million shares of stock outs..
Walter Industries has $8 billion in sales and $2.8 billion in fixed assets. Currently, the company's fixed assets are operating at 90% of capacity. What is Walter's target fixed assets/Sales ratio? What level of sales could Walter Industries have obt..
Assume for each of the following independent cases that the annual accounting period ends on December 31, 2014, and that the revenue and expense accounts at that date reflect a loss of $30,000. Assume that the company is a sole proprietorship owned b..
Create a chart of T-Accounts and post each journal entry to the appropriate accounts.
When Renee was living, she and Luke each bought a life insurance policy at the birth of their first child. They used the multiple-of-earnings approach to determine how much life insurance to purchase. what would the present value of Renee's life insu..
Fox Ten Limited (FTL) is a new company and management are trying to decide on a financing structure. They need to raise funds of $15 million and are deciding between the following options: The first option is to use 90% equity and 10% debt. It will i..
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