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A company’s cash position, measured in millions of dollars, follows a generalized Brownian motion with a drift rate a = 0.1 per month and a volatility rate b = 0.4 per month. The initial cash position is 2.0.
a) What are the probability distributions of the cash position after 1 month, 6 month and 1 year?
b) What are the probabilities of a negative cash position after 6 months and 1 year?
c) At what time in the future in the probability of a negative cash position greatest?
What is the likely impact of convergence on the insurance industry? Do you think there will be regulatory changes in the future? Why or why not?
As a knowledgeable investor, would you prefer to invest in a highly efficient market or a relatively inefficient market? Explain. As an inexperienced investor, would you prefer to invest in a highly efficient market or a relatively inefficient market..
A hedge fund has a capital of $100 million and invests in a long/short strategy on the U.S. equity market, with a long bias. It follows a 150/50 strategy meaning 150% long and 50% short. Shares can be borrowed from a primary broker. The primary broke..
You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. A large networking company wants to incorporate your software into their systems and is offering to pay you $479,0..
A 10 year maturity bond with a coupon rate of 5.5% and face value of $1,000 makes semi-annual coupon payments. What is the bond’s yield to maturity if the bond is selling for: (a) 900? (b) 1,000? (c) 1,100?
The following probability distribution of expected returns have been determined for Benko Corporation Probability Expected Returns (Outcomes) .30 12%, .40 15%, .20 25%, .10 0%. First calculate the expected rate of return, r with ^? Now calculate the ..
Use the following information about Rat Race Home Security, Inc. to answer the questions: Average selling price per unit $318. Variable cost per unit $191 Units sold 480 Fixed costs $9,389 Interest expense $15,645 Based on the data above, what is the..
Simplicity Printers is considering a project with the following cash flows: Initial Outlay = $126,000 Cash Flows: Year 1 = $34,000 Year 2 = $69,000 Year 3 = $64,000 If the appropriate discount rate (WACC) is 11.5%, compute the NPV of this project.
Describe in detail the differences and similarities in calculating the present value and future value of a lump sum, annuity, perpetuity and A series of unequal (multiple) cash flows.
Hayden Ltd intends to make its first dividend payment 5 years(s) from now. It then intends to pay dividends annually thereafter. The company has announced it expects the first three dividends to all be of the magnitude of around 5 cents per share.
The following data are displayed in the financial market: Spot price on Walmart stock = $59; Expiration of the futures contract = one year; Interest rate = 6 percent per year;
Which of the following bonds is trading at a premium?
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