In a regression of the single-index model, the R-square is 66%, residual variance is 0.02, beta estimate is 1.3. What is the variance of the market excess return? Answer: (in decimal format, keep 4 decimal places).
Q: The British interest rate is 50%, and the U.S. interest rate is 8%. However, the U.S. interest rate ...
A: Interest rate parity Interest rate parity is referred to as the concept which governs the relationsh...
Q: Finance professionals make decisions that fall into three distinctive areas: corporate finance, capi...
A: Corporate finance deals with the capital structure of a company, funding, and it also consists of al...
Q: Consider the stock table below a. What is the current price of the stock? b. What are shareholders t...
A: The stock tables provide trading information such as current stock price, bid price, ask price, beta...
Q: A friend asks to borrow $47 from you and in return will pay you $50 in one year. If your bank is off...
A: The present value of money is the discounted value of future cash flows. The future value is the val...
Q: An individual has $45,000 invested in a stock with a beta of 0.5 and another $30,000 invested in a s...
A: Portfolio beta = (beta of the 1st stock * its weight in the portfolio) + (beta of the 2nd stock * it...
Q: securities with different investment terms. What is the present value (PV) of cash flows from an inv...
A: The present value of the stream of cash flows is equal to the sum of the value of discounted cash fl...
Q: We learned interest rates differ across firms, and it varies with a firm's investment horizons becau...
A: Borrowers' risk is related to their creditworthiness whenever lender lends the loan they used to ver...
Q: An investor has the opportunity to invest in four new retail stores. The amount that can be invested...
A: Net Present Value or NPV can be defined as the value determined by deducting the present value of ca...
Q: If Rex wants to be a millionaire by the time he retires (45 years from now), how much does he need t...
A: Present Value: It represents the present worth of the future amount and is computed by the multipli...
Q: A man bought a car for P 650,000 on an installment basis. If he paid a down payment of P 120,000 cas...
A: Car price = P650,000 Down payment = P120,000 Loan amount (PV) = 650,000-120,000 = P530,000 Period = ...
Q: Problem 2: Leni Robredo was hired as an investment analyst for XYZ Corporation. The latter asked the...
A:
Q: Jack Fitzgerald wishes to purchase a used car that has a cash price of $13,000. The installment t...
A: Cash price = $13000 Down payment = $4000 Loan amount = 13000-4000 = $9000 Number of monthly payments...
Q: List and briefly define the five risk-management strategies that are available.
A: The risk management strategies refers to the various methods to treat or manage the risk. The follow...
Q: Which of the following is NOT true of options? I. The writer decides whether the option will be exer...
A: Call option gives holder a right to buy a stock, but it is not an obligation to buy the stock. Optio...
Q: Creative negotiation techniques that establish deal structure such as offering owner financing , a l...
A: Negotiation is defined as the style of discussion factors, where individuals have an effort to satis...
Q: Mr. Jones will invests P 5,000 in a fund at the end of each 6 months to accumulate P 100,000 to buy ...
A: When an investor makes regular periodic deposits in an investment, this is known as an annuity. The ...
Q: Commercial paper is usually sold at a discount. Mucus Corporation has just sold an issue of 90-day c...
A: When the effects of compounding over time are considered, an effective annual interest rate is the r...
Q: What is the amount of 15 equal annual deposits that can provide five annual withdrawals when a first...
A: The flow of payments which are made at regular interval of time are termed as annuity when amount is...
Q: Problem 2: Contribution margin income statements for Beyonce Couture and Rihanna Cosmetics for the y...
A: Solution:-We know, Operating Leverage = Contribution margin / Operating Income
Q: Marcella päid for a kitchen set over time, signing an installment contract that required monthly pay...
A: To calculate the value on the date of purchase, it is required to calculate the present value of all...
Q: If Rex wants to be a millionaire by the time he retires (45 years from now), how much does he need t...
A:
Q: Allegra Inc. has one million shares outstanding. The company is considering the issue of debt of $10...
A: Let the breakeven EBIT = EBIT Number of shares initially (n1) = 1 million Number of shares after add...
Q: You can _____ a euro call and ______ a euro put if you expect the euro to depreciate. A. buy; buy ...
A: Call option gives its holder option not obligation to buy a underlying securities at specified price...
Q: The rise of securities markets and the expansion of intermediation by nonbanks has come partly at th...
A: A "security" is a fungible, negotiable financial instrument that has some type of monetary value. It...
Q: Consider the following investment alternatives: Investment Rate Compounding A 6.502% Annual Daily Qu...
A: The real interest that an investor earns on the investment and a borrower pays on the loan after con...
Q: Weigh-in the advantages and disadvantages of leasing over debt financing in acquiring long-term asse...
A: Long-term assets are assets that will benefit the organisation for more than a year, whether they ar...
Q: Question 6 In terms of APR, which of the following loans would cost you the most to borrow? Principa...
A: Loan is a value which is borrowed from external sources like banks and this amount is repaid in fixe...
Q: North American location known for its high temperature ocean surface and its much lower ocean temper...
A: Before investing in new projects or assets, profitability of the project is evaluated on the basis o...
Q: An investor purchased a 91-day, $10,000.00 T-bill on its issue date for $9920.61. After holding it f...
A: A Treasury Bill (T-Bill) is a Treasury Department-backed one-year or less U.S. government debt oblig...
Q: Kween Yazmine's mother borrowed Php35,000 to fix their car. The bank charges 5% interest for two yea...
A: Borrowed amount (PV) = Php 35,000 Interest rate (r) = 5% Period (n) = 2 Years
Q: QUESTION #1. Answer must be in DECIMAL FORM How many YEARS is the PAYBACK PERIOD of PROJECT 1? QUEST...
A: In capital budgeting payback period is the time taken to recover the amount put in as the initial in...
Q: ANSWER THESE 2 QUESTIONS. THANKYOU BARTLEBY. 11. What will be the future worth of money after 12 ...
A: Simple interest is calculated using the loan's primary, or initial, amount.Compound interest, someti...
Q: (3) Due to earlier snowmelt associated with climate change, there is a need to replace the water sto...
A: Benefit cost ratio is one of the measures which is used to evaluate the project’s profitability. PV ...
Q: Compare and contrast adjustable-rate mortgages (ARMs) to Growth Equity Mortgage (GEM). What are the ...
A: GEM and ARM are the types of mortgage options that are available to the borrower. They are different...
Q: Your firm spends $488,000 per year in regular maintenance of its equipment. Due to the economic dow...
A: IRR is a rate at which NPV of the project is equal to the zero or it can be said that PV of cash inf...
Q: 3. Mando Inc. next year earnings per share is expected to be $7. Its return on equity is 20%, which ...
A: Given, Earnings per share is $7. Return of equity 20% Market required return is 12%
Q: You are considering a safe investment opportunity that requires a $780 investment today, and will p...
A: Investment (X) = $780 Payment after 2 years (P2) = $870 Payment after 5 years (P5) = $640 Let r = IR...
Q: Furnco sells office chairs. Annual demand is normally distributed with a mean of 1040 chairs and a s...
A: No of orders to be placed = A ÷ EOQ where A = annual units demanded EOQ = economic order ...
Q: What is the coupon rate on a 10-year quarterly coupon corporate bond with a 5.1% YTM and a price of ...
A: Par value (FV) = $1000 Coupon rate = C Quarterly coupon amount (P) = 1000*C/4 = 250C Years to matur...
Q: 2. Finance in an organization Corporate finance is concerned with the different aspects of a busines...
A: Financial management (FM) means managing all the activities related to funds whether raising the fun...
Q: What are capital expenditures? Multiple Choice Additions or subtractions from debt. Outlays ...
A: Capital expenditures refer to expenditures made on fixed assets that provide long-term benefits to t...
Q: Tuxa inc . Produces an average 40 chairs / day. Labor costs average $ 570, material costs are typic ...
A: Profit also called as productive can be found out from the revenue and cost and from that we can fin...
Q: ) Costs for maintaining buildings at an industrial complex over a -year period are expected to be $7...
A: Uniform annual payment can be calculated by using this equation P =PW*r1-1(1+r)n where P=uniform ann...
Q: Jack has $800 in credit card debt that has a 18 % yearly interest rate, as well as $1,700 in a savin...
A: A person earns interest on the savings made by him. He also incurs interest expenses on the amount b...
Q: lease solve the all and the long expalaining im needed max in 30 minutes and no reject thank u ...
A: Analyzing potential loss through the investment in stocks and taking appropriate actions to mitigate...
Q: Which of the following is NOT the correct statements regarding forward contracts? I. contain a commi...
A: A forward contract is a contract entered between the parties to buy and sell assets at a predetermin...
Q: Suppose a firm is expected to increase dividends by 20% in one year and decrease by 12% in two years...
A: Data given:: Last dividend = $1.55 Dividend in Year 1 increases by 20% Dividend in Year 2 decreases ...
Q: Question 9 Mr. Dover is purchasing a government strip bond with a face value of $5,000 and 30 years ...
A: Bonds Bonds are the liabilities of the company which is issued to raise the funds required to financ...
Q: If you accumulated P 70,700.00 from an investment of P 10,005.00 in 240 months, what is the rate of ...
A: The formula for simple interest is: A = P*(1+rt) where A is the final amount P is the initial prin...
Q: ou are holding a portfolio of 100 shares of type I firms that are affected only by firm-specific ris...
A: The question is based on the concept of risk associated with portfolio investment. The risk of a por...
Step by step
Solved in 2 steps
- In a regression of the single-index model, the R-square is 68%, residual variance is 0.08, beta estimate is 0.7. What is the variance of the market excess return?The variance ratio (VR) can be used to determine whether returns satisfy the efficient market hypothesis (EMH). Let n = 5 and r5,t be the five period log return at time t, where t = 1, 2,..., T. 1. Express (r5,t — Ã5) in terms of deviations of the relevant one period log returns from their respective means. Denote 75 to be the mean of the five period log return.The returns on assets C and D are strongly correlated with a correlation coefficient of 0.80. The variance of returns on C is 0.0009, and the variance of returns on D is 0.0036. What is the covariance of returns on C and D? Give typing answer with explanation and conclusion
- A probability distribution of possible returns from a share has a variance of 0.0064. What is the standard deviation of this probability distribution? a. 0.08 b. 0.64 c. 8% d. Both (a) and (c)In a simple linear regression based on 20 observations, it is found b1 = 3.05 and se(b1) = 1.30. Consider the hypothesis : H0 : β1 = 0 and HA : β1 ≠ 0 . Calculate the value of the test statistic.Suppose the index model for stocks A and B is estimated with the following results: rA = 2% + 0.8RM + eA, rB = 2% + 1.2RM + eB, σM = 20%, and RM = rM − rf . The regression R2 of stocks A and B is 0.40 and 0.30, respectively. Answer the following questions. Total: (a) What is the variance of each stock? (b) What is the firm-specific risk of each stock? (c) What is the covariance between the two stocks?
- Consider two assets with expected return R1=0.22,R2=0.55and variance are s1=0.80, s2=0.88 and r12=0.55 respectively.A portifolio with weights W1=0.25 and W2= 0.65 is formed calculate the expected return and variance of the portifolioGiven the following information, determine the beta coefficient forStock L that is consistent with equilibrium: r⁄L = 10.5%; rRF = 3.5%; rM = 9.5%.Are the following statements true or false? Provide a short justification for vour answer. а) assets A, B, C, with expected returns and standard deviations: Suppose you are a mean-variance optimizer. The risk-free rate is 3%. There are three risky E [řA] = 10%, SD [řA] = 5% E [řB] = 15%, SD [řB] = 7% E [řc] = 12%, SD [ŕc] = 9% You cannot invest in all three risky assets. Instead, you have to choose whether to invest in only assets (A, B), or only assets (A, C). Asset B mean-variance dominates asset C, since it has higher return and lower standard deviation than asset C. Thus, as long as you are risk-averse, you would always prefer the set of assets (A, B) to the set assets (A, C). b) the same market B's. The covariance matrix between A, B, C is: Suppose the CAPM holds. Consider three stocks A, B, C. Suppose that assets A, B, C have 0.05 0.03 0.03 0.05 0.05 Assets A, B, C have the same variance. However, assets A and B are positively correlated with each other, so they have larger…
- Assuming that the rates of return associated with a given asset investment are normally distributed; that the expected return, r, is 18.7%; and that the coefficient of variation, CV, is 1.88, answer the following questions: a. Find the standard deviation of returns, sigma Subscript rσr. b. Calculate the range of expected return outcomes associated with the following probabilities of occurrence: (1) 68%, (2) 95%, (3) 99%.Use the following returns for X and Y. Returns Year X Y 1 22.7 % 29.1 % 2 – 17.7 – 4.7 3 10.7 31.1 4 21.4 – 16.4 5 5.7 35.1 a. Calculate the average returns for X and Y. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the variances for X and Y. (Do not round intermediate calculations and round your answers to 6 decimal places, e.g., 32.161616.) c. Calculate the standard deviations for X and Y. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)Calculate the range, the expected rate of return, the variance, and the standard deviation for the problem below: Economic Condition Probability Expected Return Better than expected 0.15 0.65 Good 0.25 0.3 Average 0.45 0.15 Poor 0.1 -0.15 Terrible 0.05 -0.35