ABC XYZ 11.40 11.40 b. Which stock has greater dispersion around the mean return? ABC .XYZ c. Calculate the geometric average returns of each stock. (Do not round Intermediate calculations. Round your answers to 2 dec places.) ABC XYZ Geometric Average
Q: What is the price of a 4-year annual pay coupon bond with a coupon of 6%? • 103.54 • 100.00 •…
A: C=6% (0.06 as a decimal),r (the yield or interest rate) is not specified,n=4 years (4-year bond),F…
Q: McCabe Corporation is expected to pay the following dividends over the next four years: $15, $11,…
A: > Given data:> Gowth rate = 4%> Required return = 10.3%> Dividend in four years = 2.95
Q: Assume that you believe that purchasing power parity (PPP) holds. You are an Australian investor…
A: Expected yield refers to the return earned by the investor from the trading of currency of one…
Q: Slush Corporation has two bonds outstanding, each with a face value of $3.4 million. Bond A is…
A: Bond A Unsecured debt= Face value - Amount of Head office building. =…
Q: Pete Sampras borrows $10,000 to purchase a car. He must repay the loan in 48 equal end of periodic…
A: The nominal rate is just the monthly rate multiplied by the number of periods in a year.Nominal Rate…
Q: An investment in a baseball card collection is most likely classified as being a(n): a. derivative…
A: We are given the following statement -An investment in a baseball card collection is We need to…
Q: Lauren has a margin account and deposits $50,000. Assume the prevailing margin requirement is 40%,…
A: “Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: 52-Week Price Lo 10.43 33.42 69.50 14.14 Manta Energy .99 20.74 Winter Sports .32 Hi 77.40 55.81…
A:
Q: The ABC company is unlevered (that means, it currently has no debt) and is valued at $150,551. There…
A: Company is unlevered it means no debt in the capital structure.Company value = $150,551Number of…
Q: Hotel Cortez is an all-equity firm that has 9,400 shares of stock outstanding at a market price of…
A: Current Number of shares outstanding (N0) = 9400Current market price per share = $30Number of debts…
Q: Use the information below to answer the following question. Exchange Rate So($/ €) $ F360(S/€) S…
A: nterest rate parity (IRP) is an economic theory that suggests that the difference in interest rates…
Q: A firm is evaluating a project which requires Rs.10 million in investments. The Firm's financial…
A: An investment involves the purposeful allocation of resources, be it monetary funds, time, or…
Q: A building is priced at $250,000. If a down payment of $25,000 is made and a payment of $5000 every…
A: The time value of money (TVM) is a financial concept that recognizes the idea that a sum of money…
Q: You purchase a home for $434,000 by making a down payment of 15% and financing the remaining amount…
A: First we need to use loan amortgage formula below to calculate monthly payment. where P=Loann…
Q: Robert had an accident and injured a driver and her car. He has auto insurance with the minimum…
A: InsuranceInsurance is a type of financial security or protection against certain casualties or…
Q: A company is financed with equity of $4.5 million and a bank loan of $2.5 million with an interest…
A: Return On Equity refers to the percentage of earnings available to the equity shareholders.Degree of…
Q: Based on Exhibit 9-9, or using a financial calculator, what would be the monthly mortgage payments…
A: We take loans in order to buy things like a car or a house. The mortgage or the loan is then repaid…
Q: In appraising the county courthouse, the appraiser would most likely use the A. comparable sales…
A: (i) county courthouses are public buildings with uniq structures. Theses are not typically bought…
Q: On January 1, 20x1, SALIENT PROMINENT Co. issued 1,000, P4, 000, 12%, 3-year bonds for F 4,412,336.…
A: Par value 4,000,000Coupon rate12.00%Years to maturity (years) 3Present Value /…
Q: Describe the relationship between coupon rate and required rate of return that will result in a bond…
A: A Bond will sell at a discount when coupon rate is less than the required rate of return for a given…
Q: The 6-month interest rate in the US is 12.25% p.a. The 6-month interest rate in Canada is 15.25%…
A: The objective of the question is to determine if the interest rates and forward rate are in…
Q: A student bought a rental property for $40 000.00 down and monthly payments of $1000.00 for 5 years.…
A: Variables in the question:Down payment=$40000Monthly payment=$1000N (years)=5Rate=5.75% (compounded…
Q: You are a bond portfolio manager and have $1.2 million that you will invest for 3 years. You have an…
A: The portfolio can be designed to reduce the risk factor along with maximum possible returns from the…
Q: To calculate the RATFCF (Real After - Tax Free Cash Flow) associated with the purchase of the new…
A: The marginal tax rate signifies the proportion of tax imposed on every extra dollar of income…
Q: The four actors below have just signed a contract to star in a dramatic movie about relationships…
A: ActorsContract amount (a)Discount factors (b)Present value…
Q: Fooling Company has a callable bond outstanding with a coupon of 12.4 percent, 25 years to maturity,…
A: Yield to call refers to the return that the bond holder will earn if he holds the bond till it is…
Q: Erica purchased an annuity that had an interest rate of 3.75% compounded semi- annually. It provided…
A: Present value (PV) is the value today of an amount you'll receive or pay in the future, considering…
Q: ou can borrow and lend at the interest rates of 8.00% in the US and 7.00% in Canada. Based on…
A: US Interest Rate = 8.00% or 0.08Canada Interest Rate = 7.00% or 0.07Interest Rate Parity (IRP) is a…
Q: Submit your solutions as an Excel document. Be sure to clearly label the various parts of the…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: Firm WHOA is a one-year firm that produces a single cash flow next year. In the good state, the…
A: Firm cost = Risk free rate +Asset beta *Risk premium.= 3% + 0.95 *8%= 10.60%Value of WHOA= Expected…
Q: An asset has an average return of 10.79 percent and a standard deviation of 22.71 percent. What is…
A: Maximum rate of return depends on the probability of event and standard deviation and mean expected…
Q: Assume that you have just purchased some shares in an investment company reporting $575 million in…
A: Net asset value (NAV) per share = (Total Assets - Liabilities) / Number of shares outstanding
Q: Using duration and convexity approximation, compute the percentage price change on a 10-year fixed…
A: Given:Modified duration (Dmod) = 6 yearsConvexity (C) = 200 year²Change in yield (Δy) = 1%
Q: A firm had the following accounts and financial data for 2017. Sales Revenue $3,060 Accounts…
A: Earnings after deducting all the expenses, finance costs and dividends to preferred stockholders…
Q: Consider the following information about Truly Good Coffee, Inc.:. Use the information in the table…
A: As per guideline if more than 3 subparts asked in a single question than i can solve only first 3…
Q: A farm building costs $54,000 to build today and will earn after-tax net cash flows of 16,000 per…
A: S.NOYEAR (A)CASH FLOW…
Q: Ornaments, Inc., is an all-equity firm with a total market value of $652,000 and 31,700 shares of…
A: EPS is earning per share It can be calculated as the earning available for the equity holders after…
Q: Fiesta Foundry is considering a new furnace that will allow them to be more productive. Three…
A: The extra cash flow that is produced or incurred as a result of a particular project, investment, or…
Q: A company is considering the opportunity to invest into a new 12-year project: manufacturing and…
A: A financial break even is a percentage of units sold where profit after tax is equal to $0.Let the…
Q: State of Economy Boom Good Poor Bust of Economy 15 .45 .30 .10 Stock A .35 16 -.01 -.10 Stock B .40…
A: The weightage of each scenario's chance of occurrence together with the profit that could be…
Q: Jamie has wealth of $10,000 to invest. The market portfolio consists of three stocks with 20% being…
A: Calculate the weights of the market portfolio:Stock A weight: 20%Stock B weight: 40%Stock C weight:…
Q: Each year, the Internal Revenue Service adjusts the value of an exemption based on inflation (and…
A: Exemption=$3800Inflation=4.90%
Q: Find the interest payment for the following bond (par value for each is $1,000, semi-annual…
A: A Zero coupon bond maturing in 10 years.The Zero coupon bond, as name the suggests, does not make…
Q: QUESTION 6 part 1) For this and the next 2 questions. A 7-year, $1,000 par bond has an 8% annual…
A: Compound = Semiannually = 2Time to Maturity = tm = 7 * 2 = 14Face Value = fv = $1000Coupon Rate = c…
Q: Finance All rates are quoted with continuous compounding. A caplet caps the 3-month rate, starting…
A: 1. Caplet on 3-month Rate: - Start: In 9 months - Cap Rate: 5% (0.05 in decimal) - Principal:…
Q: TRUE OR FALSE: Assuming an efficient market, two financial securities cannot have the same risk and…
A: The efficient market hypothesis states that information is quickly and accurately reflected in asset…
Q: Suppose that the market risk premium is 5% and the risk-free rate is 4%. Risky assets A and B are…
A: The expected return of a portfolio constructed of two assets can be calculated using the Capital…
Q: Assume the following information: Value of an Australian dollar (AS) in S Value of Mexican peso in S…
A: > First we need to calculate the value of Mexican peso received for :250,000> The value of…
Q: Akeem Joffer hopes to a new cabin on Webb Lake in Maine. Akeem has $13,000 saved today and wants to…
A: Future value refers to the future value of annuity deposit and the future cash flows compounded over…
Q: Answer the following questions briefly 1) Describe the two main purposes of Financial Ratios. 2)…
A: The first main purpose of financial ratios is to provide analysis of company financial performance…
Step by step
Solved in 3 steps with 5 images
- Consider the rate of return of stocks ABC and XYZ. Year rABC rXYZ 1 20 % 28 % 2 8 11 3 16 19 4 4 1 5 2 −9 (PLEASE SKIP THE FIRST THREE QUESTIONS) a. Calculate the arithmetic average return on these stocks over the sample period. b. Which stock has greater dispersion around the mean return? multiple choice A. ABC B. XYZ c. Calculate the geometric average returns of each stock. What do you conclude? (Do not round intermediate calculations. Round your answers to 2 decimal places.) d. If you were equally likely to earn a return of 20%, 8%, 16%, 4%, or 2%, in each year (these are the five annual returns for stock ABC), what would be your expected rate of return? (Do not round intermediate calculations.) e. What if the five possible outcomes were those of stock XYZ? f. Given your answers to (d) and (e), which measure of average return, arithmetic or geometric, appears more useful for predicting future…Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 3.8% + 1.25RM + eA RB = –1.8% + 1.60RM + eB σM = 18%; R-squareA = 0.24; R-squareB = 0.18 What are the covariance and correlation coefficient between the two stocks? (Do not round intermediate calculations. Calculate using numbers in decimal form, not percentages. Round your answers to 4 decimal places.)Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 3.6% + 1.2RM + eA RB = -1.6% + 1.5RM + eB OM = 16%; R-squarea = 0.25; R-square; = 0.15 What is the covariance between each stock and the market index? (Calculate using numbers in decimal form, not percentages. Do not round your intermediate calculations. Round your answers to 3 decimal places.) Covariance Stock A Stock B
- Compute the abnormal rates of return for the following stocks during period t (ignore differential systematic risk): Stock % % % % BFT % B F T UE Rit = return for stock i during period t Rmt = return for the aggregate market during period t Use a minus sign to enter negative values, if any. Round your answers to one decimal place. ARBE: ARF: ARTI: ARC: AREL: с Rit 11.5% 9.2 12.5 12.5 15.9 Rmt 4.7% 6.2 6.6 15.2 11.1Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA= 3.2% + 1.10RM + eA RB = -1.4 % + 1.25RM + eB OM= 30%; R-squareд = 0.28; R-squareg = 0.12 What is the covariance between each stock and the market index? Note: Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is provided as 20%. Do not round your intermediate calculations. Round your answers to nearest whole number. Answer is complete but not entirely correct. Stock A Stock B Covariance 93 x 101 xS Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 3.6% + 1.20RM + eA RB = -1.6% + 1.5RM + eB OM = 16%; R-squareд = 0.25; R-squareg = 0.15 What is the standard deviation of each stock? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Stock A Stock B Standard Deviation % %
- Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 3.2% + 1.10RM + eA RB = –1.4% + 1.2RM + eB σM = 30%; R-squareA = 0.28; R-squareB = 0.12 What is the standard deviation of each stock? (Do not round intermediate calculations. Round your answers to 2 decimal places.)Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA= 5.0% + 1.30RM + eA RB= -2.0% + 1.6RM + eB sigmaM= 20% ; R-squareA= 0.20 ; R-squareB= 0.12 What is the standard deviation of each stock (write as percentage, rounded to 2 decimal places)?Based on the following information: State of Economy Probability of State of Economy Return on Stock J Return on Stock K Bear .20 -.030.024 Normal .55.128.052 Bull .25 .208.082 a. Calculate the expected return for each of the stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation for each of the stocks. ( Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g , 32.16.) c. What is the covariance between the returns of the two stocks? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.) d. What is the correlation between the returns of the two stocks? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., .1616.)
- The index model has been estimated using historical excess return data for stocks A, B, and C, with the following results: RA = 0.02 + 0.9RM + eA RB = 0.04 + 1.2RM + eB RC = 0.10 + 1.ORM + eC OM oM = 0.22 o(eA) = 0.21 o(eB ) = 0.11 o(eC ) = 0.23 a. What are the standard deviations of stocks A, B, and C? b. Break down the variances of stocks A, B, and C into their systematic and firm-specific components. c. What is the covariance between the returns on each pair of stocks? d. What is the covariance between each stock and the market index?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 is the covariance between each stock and the market index?Given 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