The probability distribution of returns for the two stocks X and Y are as follows: Probability 0.1 0.3 0.05 0.25 0.15 0.15 For each of the two stocks, calculate: a. The expected return. b. Variance of returns c. Volatility of returns. Stock X 0.05 -0.1 0.08 -0.08 0.20 0.12 Return Stock Y 0.13 0.04 -0.12 0.21 0.1 -0.05
Q: Sales : $250,000 Costs : $134,000 Depreciation : $10,200 Operating expenses : $6,000 Interest…
A:
Q: Joshua loaned $69,000 to a small business at 2.61% compounded quarterly for 1 year and 9 months. How…
A: When the borrower borrows a loan from the lender, he has to pay a rate of interest on the borrowed…
Q: 3M stock started the year at $146, and by the end of the year had increased to $174. 3M also paid $7…
A: The total gain and loss from selling a stock with respect to the price of buying a stock is known as…
Q: Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free…
A: The expected return is the estimation of profit or loss that an investor determines from his…
Q: Calculating NAV A fund has a market value of securities of $860 million, cash and receivables of $29…
A: Market Value of Securities = s = $860 millionCash and Receivables = cr = $29 millionCurrent…
Q: Answer is complete but not entirely correct. 4,972.00 EFN
A: We can determine the external funds needed using the formula below:
Q: Dylan purchases a retirement annuity that will pay him $1,500 at the end of every six months for the…
A: Present value is an estimate of the present value of future cash values that may be received at a…
Q: Given $100,000 to invest, construct a value-weighted portfolio of the four stocks listed below. icon…
A: Here,StockPrice/ShareNumber of Shares Outstanding (millions)GS $ 11.001.04J&J $…
Q: Ms. Jennie Smith owns a house in Ottawa. She purchased the house in 2002 for $122000. In June 2019,…
A: A capital gain refers to the profit generated when an individual or entity sells a capital asset for…
Q: A bond's par value is the same as market value. True or False
A: The bond is said to be a fixed investment type where at the bond holders land money to the issue…
Q: Los Pollos Hermanos is considering Projects S and L, whose cash flows are shown below. These…
A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…
Q: pany Z-prime’s earnings and dividends per share are expected to grow by 3% a year. Its growth will…
A: We will use the dividend discount model approach here.As per the dividend discount model the price…
Q: (Comprehensive Problem) Suppose that you are in the fall of your senior year and are faced with the…
A: The money's time value concept reveals that any sum of money is worth more now than it would be in…
Q: Required information [The following information applies to the questions displayed below.] A pension…
A: The Sharpe ratio calculates performance adjusted for risk by dividing the extra profit earned on a…
Q: Explain what a first-to-default credit default swap is. Does its value increase or decrease as the…
A: A First-to-Default Credit Default Swap (FTD CDS) is a financial derivative instrument used in the…
Q: Current Attempt in Progress * Your answer is incorrect. Management of Pharoah, a biotech firm,…
A: We need to use dividend discount model to calculate value of stock.WhereD1, D2, D3 are dividends…
Q: Given the information below for Seger Corporation, compute the expected share price at the end of…
A: Years201620172018201920202021Price97.50103.40102.1099.60121.10136.50EPS3.153.864.665.367.258.25CFPS7…
Q: Flex Company just paid total dividends of $825,000 and reported additions to retained earnings of…
A: Stock Price = P/E Ratio x EPS
Q: ch sells for $1020. Instead of paying the total amount at the time of purchase, the same couch can…
A: If money is paid in cash company accept lower amount and that is going to be discount due to the…
Q: Jensen Inc. has total equity of $72 billion and 720 million shares outstanding. Its ROE is 14.43%.…
A: Equity = e = $72 billionNumber of Shares = n = 720 millionReturn on equity = ROE = 14.43%Dividend…
Q: Each of the three independent situations below describes a finance lease in which annual lease…
A: Lease payments:Lease payments refer to the regular monetary installments made by a lessee to a…
Q: 5. In one year, Bold Betties Inc. will pay a $2 per share dividend and it is expected to grow by 5…
A: The dividend discount model suggests that the intrinsic price of the share is the present value of…
Q: Bank of America has a 5%, annual coupon bond that will mature in 19 years. The interest rate for…
A: Par value = $1,000Annual coupon rate = 5%Annual coupon amount = Par value *Annual coupon rate…
Q: Suppose a firm has a EBIT of $450, Depreciation of $65, taxes of $50, change in NWC of $35, and net…
A: The value of the firm is the present value of all the future cash flows expected from the firm…
Q: ost recent fiscal year, the Hammock Company's total equity was $450 and net income was equal to $97.…
A: Sustainable growth rate is which can be obtained without any external funding required and can…
Q: Debra King is planning to buy 10-year zero coupon bonds issued by the U.S. Treasury. If these bonds…
A: Face value = $1,000Bond price = $404.54Years to maturity = 10 Number of periods =The semi-annual…
Q: Kurt has 25/50/20 auto insurance coverage. One evening he lost control of his vehicle, hitting a…
A: Let us first determine what the given numbers mean.The first number is 25 and means that Kurt will…
Q: Company Z-prime's earnings and dividends per share are expected to grow oy 4% a year. Its growth…
A: Dividend discount model is used for calculation of value of stock based on the dividend and growth…
Q: Tear Price EPS CFPH SPE 2016 $91.60 4.49 7.72 47.60 2017 $97.50 5.20 8.60 52.60 2018 $96.20 6.00…
A: Share price:It represents the price at which investors are willing to buy or sell shares in the open…
Q: The stock of Business Adventures sells for $40 a share. Its likely dividend payout and end-of-year…
A: The expected return is the estimation of profit or loss that an investor determines from his…
Q: 34. Firm B's one million shares of stock currently sell for $20 each. Firm A estimates the economic…
A: Stock market:The stock market refers to a platform where individuals and institutions can buy and…
Q: What is the present value of the following cash flow stream at a rate of 9.0%? Years: 0 1 2 3 CFs:…
A: Present value is an estimate of the present value of future cash values that may be received at a…
Q: Stevenson's Bakery is an all-equity firm that has projected perpetual EBIT of $153,000 per year. The…
A: Value of a levered firm:The value of a levered firm is a crucial concept in corporate finance that…
Q: onsider a borrower who took a loan worth 10000 at the beginning of period 1. The loan is to be…
A: Loans are paid by equal annual installments and these carry the payment for interest and payment for…
Q: Which of the following is a true statement Multiple Choice
A: A rights issue, also known as a rights offering or a rights offering, is a way for a company to…
Q: The CharmCity Pharm Inc has an operating cash flow of $358,000 and a cash flow to creditors of…
A: Operating Cash flow = ocf = $358,000Cash Flow to Creditors = cfc = $213,400Decrease in Net working…
Q: you is 7.75 percent. You will make a down payment of 10 percent of the purchase price. a. Calculate…
A: A mortgage term is a mortgage's whole life period. It's the period of time in years and months…
Q: Mutual Fund Returns and Costs You buy a no load mutual fund share at a NAV of $21.00 and sell it one…
A: Mutual funds are pools of investment collected from a large number of investors and invested in the…
Q: We are looking at a European put option and a European call option written on the same under same…
A: Options gives the opportunity to buy and sell stocks on the expiration but there is no obligation to…
Q: a. What is the market risk premium? Show your work. b. What is the cost of equity for XYZ? Show your…
A: Please note that only 1 question can be solved under the Answering Guidelines. The solution to stock…
Q: Your grandfather left you an inheritance that will provide an annual income for the next 20 years.…
A: The amount that is expected to be received at some future date in lump-sum or as an annuity for a…
Q: A bond is issued with a coupon of 4% paid annually, a maturity of 39 years, and a yield to maturity…
A: The price of the bond is the present value of all the coupon payments and the par value discounted…
Q: David Quincy wants to withdraw $30,800 each year for 10 years from a fund that earns 10% interest.…
A: Given:Annual payment = $30,800Interest rate = 10%Years = 10years.
Q: The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $85 per share…
A: Put-Call Parity is a financial principle stating that the price of a European call option and a…
Q: For the following stock investment, find (a) the total purchase price, (b) the total dividend…
A: The investment in shares are quite risky but returns are also maximum but some time the there is…
Q: . What to the nearest cent is the value of the long forward contract?
A: A financial agreement between two parties to purchase or sell an asset at a defined future date for…
Q: Your firm is evaluating a capital budgeting project. The estimated cash flows appear below. The…
A: Net Present Value(NPV) refers to one of the concepts from the modern techniques of capital budgeting…
Q: Suppose the market portfolio has an expected return of 10% and a volatility of 20%, while…
A: CAPM stands for the Capital Asset Pricing Model. It is a financial model used to determine the…
Q: A GM and a Ford bond both have 4 years to maturity, a $1,000 par value, a BB rating and pay interest…
A: The yield to maturity is the total return an investor earned by holding the bond until the maturity.…
Q: High Growth Fund has a front load of 5% and expected return of 14.5%. Normal Fund has no load. And…
A: The total return earned on a fund for a certain period can be calculated using the formula:
Step by step
Solved in 4 steps with 6 images
- Consider information given in the table below and answers the question asked thereafter: State Probability return on stock A Return on stock B A 0.15 10% 9% B 0.15 6% 15% C 0.10 20% 10% D 0.18 5% -8% E 0.12 -10% 20% F 0.30 8% 5% Calculate covariance and coefficient of correlation between the returns of thestocks A and B.v. Now suppose you have $100,000 to invest and you want to a hold a portfoliocomprising of $45,000 invested in stock A and remaining amount in stock B.Calculate risk and return of your portfolio.The market and Stock J have the following probability distributions: ProbabIlity rM rJ 0.3 15% 20% 0.4 9 5 0.3 18 12 A. Calculate the expected rates of return for the market and Stock J. B. Calculate the standard deviations for the market and Stock JGiven the returns and probabilities for the three possible states listed below, calculate the covariance between the returns of Stock A and Stock B. For convenience, assume that the expected returns of Stock A and Stock B are 8.10 percent and 11.60 percent, respectively. (Round answer to 4 decimal places, e.g. 0.0768.) Good OK Poor Covariance Probability 0.22 0.60 0.18 Return on Stock A 0.30 0.10 -0.25 Return on Stock B 0.50 0.10 -0.30
- The index model has been estimated for stock A with the following results: RA = 0.01 + 1.2RM + eA. σM = 0.15; σ(eA) = 0.10. The standard deviation of the return for stock A isa) Share X and Share Y have the following returns with their respective probabilities. Share X Share Y Return Probability Return Probability 10% 0.3 15% 0.35% 0.31% 0.4-4% 0.4-10% 0.3 Calculate the following: i) The expected rate of returns for both shares. ii) The standard deviation for both shares. ii) On a stand-alone basis, select which stock is the riskier..The market and Stock J have the following probability distributions: Probability rM rJ 0.3 14 % 18 % 0.4 10 4 0.3 18 13 Calculate the expected rates of return for the market and Stock J. Round your answers to one decimal place. Expected rate of return (Market): % Expected rate of return (Stock J): % Calculate the standard deviations for the market and Stock J. Do not round intermediate calculations. Round your answers to two decimal places. Standard deviation (Market): % Standard deviation (Stock J): %
- Consider the following probability distribution for stocks A and B: Table 4 Probability Distribution for Stocks A and B State Probability Return on Stock A Return on Stock B 1 0.1 10% 8% 2 0.2 13% 7% 3 0.2 12% 6% 4 0.3 14% 9% 5 0.2 15% 8% The variances of Stocks A and B are _____ and _____, respectively. Group of answer choices .015%; .019% .022%; .012% .032%; .02% .015%; .011% .014%; .021%The market and Stock J have the following probability distributions: Probability rM rJ 0.3 15% 20% 0.4 9 5 0.3 18 12 Calculate the expected rates of return for the market and Stock J. Calculate the standard deviations for the market and Stock J. Calculate the coefficients of variation for the market and Stock J.Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10% 8% 2 0.20 13% 7% 3 0.20 12% 6% 4 0.30 14% 9% 5 0.20 15% 8% The coefficient of correlation between A and B is:
- The index model for stock A has been estimated with the following result: RA = 0.01 + 0.9RM + eA. If σM = 0.25 and R2A = 0.25, the standard deviation of return of stock A is:The market and Stock A have the following probability distributions: Probability Return on market Return on Stock A 0.2 18% 16% 0.3 12% 14% 0.5 10% 11% Calculate the expected rates of return for the market and Stock A. Calculate the coefficient of variation for the market and Stock A (Standard deviation for market is 3.0265% and standard deviation for Stock A is 2.0224%).Suppose that the index model for stocks A and B is estimated from excess returns with the following results:RA = 3% + .7RM + eARB = −2% + 1.2RM + eBσM = 20%; R-squareA = .20; R-squareB = .12What are the covariance and the correlation coefficient between the two stocks?