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Your sister is considering to add one additional stock to a three stock portfolio, to form a four stock portfolio. The three stocks currently held all have b=1.0, and they are perfectly positively correlated with the market. Potential new stocks A and B both have expected returns of 15%, are in equilibrium, and are equally correlated with the market, with r=0.75. However, stock A's standard deviation of returns is 12% versus 8% for stock B. Which stock should my sister add to her portfolio?
What is the approximate yield to call of a 10% coupon rate, $1,000 par value bond, currently priced at $1200, if the call can be made in seven years at a price of $1,025?
Bunge paid $3.25 in dividends in the most recent past year, which is the same amount they have paid in the prior two years. Ten years ago, Bunge dividends were $1.50 per share. What is the compound average annual growth rate for Bunge dividends over ..
There is a debate about stock repurchases whether they are liked by investors or not. Some investors like it because of tax treatments etc. and some other don't because of changes in ownership etc.
First Simple Bank pays 8.3 percent simple interest on its investment accounts. First Complex Bank pays interest on its accounts compounded annually. What rate should the bank set if it wants to match First Simple Bank over an investment horizon of 13..
We know the following regarding Ryan Inc. Total A are $200m, Debt is $60m, Equity is $130m, cash is $50m and the number of shares is 1m. I estimate that the market value of equity is 3 times the book value of it. A fire sale of the firm would bring 4..
Discuss the impact of each of the following on prepayment risk for a mortgage backed pass through security (MBS): a. High coupon interest MBS versus low coupon interest MBS b. MBS issued six years prior versus MBS issued this year c. Demographic tren..
The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up." As a result, the cemetery project will provide a net cash inflow of $87,900 for the firm during the first year, and th..
Given that risk-averse investors demand more return for taking on more risk when they invest, how much more return is appropriate for, say, a share of common stock, than is appropriate for a Treasury bill?
The Acme Chip Manufacturing Company (potato not computer) has a target capital structure of 40% debt and 60% common equity. They also have a 40% tax rate. They have three projects under consideration code named: What would be your capital budget? The..
Suppose Palmer Properties is considering investing $2.6 million today (i.e., C0 = -2,600,000) on a new project that is expected to last for 7 years. What is the payback period for the project? Show your work. What is the net present value of the proj..
1. a japanese exporter to brazil would like to sell its brl300m receivables in the spot market against yen. the
bonds are considered default-free bonds.
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