You are choosing between these four investments and you want to be 95% certain that you do not lose more than8.00% on your investment. Which investments could you choose?Average returnStandard Deviation of returns(Select the best choice below.)OA. All of the investments.OB. T-Bills only.C. Corporate Bonds and T-Bills.OD. Corporate Bonds and S&P 500.OE. Small Stocks and S&P 500.Small Stocks18.04%39.25%S&P 50011.71%19.76%Corporate Bonds6.16%T-Bills3.39%6.36%3.12%

1. Risk Tolerance and Investment Goals: You mentioned that you want to be 95% certain not to lose…

Answered: You are choosing between these four…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You are choosing between these four investments and you want to be 95% certain that you do not lose more than 8.00% on your investment. Which investments could you choose? Small Stocks Corporate Bonds S&P 500 11.71% 6.16% 18.04% 39.25% 19.76% 6.36% Average retur Standard Deviation of returns (Select the best choice below) OA All of the investments. OB. Corporate Bonds and S&P 500. OC. T-Bills only OD. Small Stocks and S&P 500 OE Corporate Bonds and T-Bils. T-Bills 3.39% 3.12%
. The market value of common stock IS primarıly based on A. the firm's future earnings C. Total assets. B. Book value. D. retained earmings 8. AT-bill pays 5 percent rate of return. Would risk-averse investors invest inarisky portfolio that pays 8 percent with a probability of 40 percent or 3 percent with a probability of 60 percent? A. Yes, because they are rewarded with a risk premium. B. No, because they are not rewarded with a nisk premium. C. No, because the risk premium is smal D. Cannot be determined. e. None of the above. 9. A firm has a P/E ratio of 18 and a ROE of 13% and a market to book value of A.0.64 B. 0.92 C. 2.34 D. 1.56 E. none of the above 10. Your opinion is that security A has an expected rate of return of 0.125. It has a beta of 1.5. The risk-free rate is 0.04 and the market expoctod rate of return is 0.11. According to the Capital Asset Pricing Model, this security is A. Underpriced. D. cannot be determined from data provided. C. fairly priced. E.…
1. You estimate the Fama-French 3-factor model for the two stocks, A and B, and find the following coefficients. You also estimate risk premiums for each factor. Calculate the cost of equity capital (i.e., expected rate of return) for each company using the 3-factor APT model. The risk-free rate is 4%. Stock Mkt A B Risk premiums 1.1 1.0 5% SMB -1.2 -2.0 HML -1.0 -1.5 3%
Use the following data for the Sara Company to calculate the cost of common stocks (Rs), the cost of Preferred stocks (Rps), and the cost of Debt: (Rd)? Item Symbol Value Risk Free Rate Rf 7% Stock Risk B 1.5 Market Return Rm 25% Interest Rate for Debt Rd (B.T) 9% TAX rate T 5% Preferred Stock Dividend D(ps) 10 Preferred Stock Price P(ps) 100 floatation cost ps FC $4 The cost of Preferred stocks: (Rps)? The cost of Debt: (Rd)?
Using the equity asset valuation model (CAPM) equation, determine the required return for the shares of the following companies, if the market return is 7.50% (Rm = 7.50%) and the risk-free asset return is 1.25% (RF = 1.25%). You must show all counts. Stock Beta SKT 0.65 COST 0.90 SU 1.42 AMZN 1.57 V 0.94
Use the following data for the Sara Company to calculate the cost of common stocks (Rs), the cost of Preferred stocks (Rps), and the cost of Debt: (Rd)? Item Symbol Value Risk Free Rate Rf 7% Stock Risk B 1.5 Market Return Rm 25% Interest Rate for Deb Rd (B.T) 9% TAX rate T 5% Preferred Stock Dividend D(ps) 10 Preferred Stock Price P(ps) 100 floatation cost ps FC $4 Answer: The cost of common stocks: (Rs)
Identify which company’s shares you would recommend as the better investment. Provide explanations. Liquidity Panda Koala Working capital 94,100 144,750 Current ratio 2.53 2.55 Quick/acid-test ratio 1.08 1.06 Solvency Panda Koala Debt ratio 0.32 0.36 Debt-to-equity ratio 0.47 0.56 Time interest earned 23.41times 19.05times Efficiency Panda Koala Accounts (and notes) receivable turnover 20.18times 14.82times Days' sales in receivables (average collection period) 22days 27days Inventory turnover 7.70times 4.91times Days' sales in inventory 57days 82days Total asset turnover 1.83times 1.90times Profitability Panda Koala Gross profit margin 29.98 %…
Determine the cost of common stock (equity). The T-Bill rate is 5.2%. The Market Return is 12.7%. What is the company's cost of equity capital if the company has a beta of 1.27? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity %
1. The percentage measure of how well an investment is doing and is often used as the basis for comparison with other investments is the _____. A. dividend yield B. price-earning ratio C. return on equity D. return on investment 2. Ricardo invested a lump sum of $11,500 in a mutual fund with an offer price of $12.33. How many shares did he purchase? (Round to the nearest thousandth.) A. 839.206 B. 932.685 C. 1,073.401 D. 1,352.035
The asset of company X have a beta equal to 1. Assume that company’s debt has a beta to 0.5 and that X’s equity has a Beta equal to 2, consider an investor who holds 10% of company’s debt and 10% of the company’s equity, the beta of the investor’s portfolio is equal to? A. 0.25 B. 1 C. 1.25 D. 0.1
A3) Finance What is the expected standard deviation of stock A's returns based on the information presented in the table? Outcome Probability of outcome Stock A return in outcome : Good 16% 65.00% Medium 51% 17.00% Bad "?" -35.00%
7.In the formula r = (D1/P0) + g, what does (D1/P0) represent?a. the expected price appreciation yield from a common stock.b. the expected dividend yield from a common stock.c. the dividend yield from a preferred stock.d. the interest payment from a bond.e. None of the above.8. According to the constant growth in dividends price formula given in the textbook, if the dividend to be paidone year from today increases and all other factors remain constant, the price of the stock will __________;if the growth rate of all future dividends increases and all other factors remain constant, the price of the stockwill __________; and if the required rate of return increases and all other factors remain constant, the priceof the stock will __________.a. decrease; decrease; decreaseb. increase; increase; decreasec. decrease; increase; decreased. increase; increase; increasee. None of the answers listed above are correct.9. Which of the following is correct about the equilibrium price of a $1,000…

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