Your eccentric Aunt Claudia has left you $50,000 in BP shares plus $50,000 cash. Unfortunately, her will requires that the BP stock not be sold for one year and the $50,000 cash must be entirely invested in one of the stocks shown below. BHP Agricultural Billiton BP Siemens Nestlé Sony Sanofi Bank BHP Billiton 1.00 0.34 0.05 0.37 0.55 0.47 0.44 BP 1.00 0.34 0.16 0.14 0.31 0.12 Siemens 1.00 0.09 0.10 0.02 0.10 Nestlé 1.00 0.33 0.51 0.06 Sony 1.00 0.20 0.30 Sanofi 1.00 0.31 Agricultural Bank 1.00 Standard deviation (%) 23.60 27.90 9.09 17.20 26.70 29.50 24.80 a. Calculate the portfolio variance for seven different portfolios. Note: Use decimals, not percents, in your calculations. Do not round intermediate calculations. Enter your answers as a decimal rounded to 5 places. b. What is the safest attainable portfolio under these restrictions?
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- Amherst Corporation, an investment banking company, often has extra cash to invest. Suppose Amherst buys900 shares of Hurricane Corporation stock at $57 per share, representing less than 5% ofHurricane’s outstanding stock. Amherst expects to hold the Hurricane stock for one month andthen sell it. The purchase occurs on December 15, 2018. On December 31, the market price of ashare of Hurricane stock is $58 per share.Requirements1. What type of investment is this for Amherst? Give the reason for your answer.2. Record Amherst’s purchase of the Hurricane stock on December 15 and the adjustment tomarket value on December 31.3. Show how Amherst would report this investment on its balance sheet at December 31 andany gain or loss on its income statement for the year ended December 31, 2018.Joyce has never invested in shares before. She has come to you, as a prospective finance graduate, for some advice. In your conversations with Joyce, you have determined her Required Rate of Return (RRR) to be 8.75%. d) Joyce decided to buy 200 000 shares in GGG Ltd., giving her 2% ownership in the company (GGG Ltd. currently has 10 000 000 issued shares). One year later, GGG Ltd. announces a private placement of a further 10,000,000 shares, in order to raise funds for their new venture: Project COVID. (i) Describe two features of a private placement of shares. (ii) What is the major disadvantage to Joyce of the above private placement? Include in your answer the effect on her ownership. (iii) Identify one other source of equity funding Joyce, as a shareholder, would prefer. Justify your choice.Lancaster Corporation, an investment banking company, often has extra cash to invest. Suppose Lancaster buys500 shares of Knight Corporation stock at $40 per share, representing less than 5% of Knight’soutstanding stock. Lancaster expects to hold the Knight stock for one month and then sell it.The purchase occurs on December 15, 2018. On December 31, the market price of one share ofKnight stock is $47 per share.Requirements1. What type of investment is this for Lancaster? Give the reason for your answer.2. Record Lancaster’s purchase of the Knight stock on December 15 and the adjustment tomarket value on December 31.3. Show how Lancaster would report this investment on its balance sheet at December 31 andany gain or loss on its income statement for the year ended December 31, 2018
- Your company, Ohiobucks (OB), hires an investment bank to underwrite an issue of 10 million shares of OB stock on a best-effort basis. The investment bank sells 8 million shares and charges OB $0.225 per share sold. The price of each share is $10.50. How much will the investment bank earn after the issuance? A. $7.0 MM B. $7.5 MM C. $1.8 MM D. $1.0 MMKareem received a retroactive salary payment of $100,000 and has decided to invest the full amount in Make Some Money Limited stock. In an effort to maximize his returns, he has decided to utilize the available 40% margin. MSM stock is currently trading at $25 and regulators require that investors maintain a margin of at least 20%. a. Deterimine Kareem's debit balance for this investment. b. How many units of the stock can Kareem buy? c. How many can the stock price fall before Kareem receives a margin call? d. Calculate Kareem's Holding period return if he sells the stock for $30 in six months. Assume that no dividends were received. e. Should all investors conduct margin transaction? ExplainStephanie was gifted $50,000.00 from grandparents and is looking to invest in stock options. Stephanie will require a return of at least 9% on her stock investments and would have to pay 25% taxes on any interest income. Dividends will be tax-free. Stephanie wants to invest stock in the following companies1. Pan-Elixir Ltd. is a pharmaceutical company. Its stock is fairly priced. Last year (t = 0), it paid a dividend of $2.50 per share to its shareholders. The company management hasestimated that it will be able to maintain a constant growth rate in dividends of 3% per annum. 2. Rebound Tourism Inc. is a travel planning establishment. Its shares sold for an average price of $40 per share last year (t = 0) and the management estimates to maintain a constant growth rate in dividends. Last year, it paid a dividend of $0.50 per share to its shareholders. 3. Cheers Inc. is a beverage producer. It pays a dividend of $1 per share to its shareholders, which is likely to remain constant over…
- Mr. Aley bought 320 shares of Apple at $40 per share; he bought the stock at the initial margin of 62%. The stock is now trading at $58.52 per share, and the federal reserve has recently lowered the initial margin requirement to 51%. Alev now wants to do a little pyramiding and buy another 320 shares of stock. What is the minimum amount of equity that he will have to put up in this transaction?Suppose that, as a fund manager, you purchase 5,000 shares of Company X on 1 January 2019 for $10 each in order to keep and earn dividends. Simultaneously, you also purchase 4,000 shares of Company Y for $7.5 each for trading purposes. The share price of Company X increases to $12 first, but after some days it drops to $11.2 and you immediately sell 3,000 shares. On the other hand, the share price of Company Y drops to $7 first, but after some days it increases to $7.6 and you immediately sell 2,500 shares. (Note that, funds make valuation on a daily basis) Assuming that there are no more price movements throughout the year, what would be the total comprehensive income as of the year end? A) $2,400B) $4,000C) $6,400D) $7,100E) Other (Please Specify)Given that Local Care, Inc.'s stock is currently selling for $65 a share, calculate the amount of money that Elijah Pearson will make (or lose) on each of the following transactions. Assume that all transactions involve 100 shares of stock, and ignore brokerage commissions. Input all answers as positive values. He short-sells the stock and then repurchases the borrowed shares at $85.Total of $ . He buys the stock and then sells it some time later at $85.Total of $ . He short-sells the stock and then repurchases the borrowed shares at $50.Total of $ .
- Your friend told you that she invested $1,000 in a portfolio of large-company stocks 5 years ago and also reinvested the dividends. Herinvestment grew to $3,456 as at today. Had she invested that same amount in a Government of Grenada bond she would have received $2,500even if she reinvested the 10 percent coupons paid on the bonds. REQUIRED How can you avoid the value of your stock from going down?If Sharon Jacobs of the previous problem (I have posted the previous problem below.) is also a founder of the company and has retained 8 million shares of its stock, how much of a difference will the auditor's decision make in her personal wealth outside of the stock option? Read Business Analysis Case 3. Henderson Industries Inc.'s stock is currently selling at $22.40 per share. Sharon Jacobs, the CEO, has options to buy 250,000 shares at $25.50 per share that expire at the end of the year. Sharon feels that if the traditional accounting method is used, implementing the deferred payment sales program will push the stock's price about halfway toward the level it was at two years ago which was about $43. (That method recognizes the entire price and cost of a sold item on the income statement at the time of sale.) If the installment sales technique is used, the price of the stock will probably be unchanged but may even go down a little. How much will Sharon make on her stock option i…Stephanie was gifted $50,000.00 from grandparents and is looking to invest in stock options. Stephanie will require a return of at least 9% on her stock investments and would have to pay 25% taxes on any interest income. Dividends will be tax-free. Stephanie wants to invest stock in the following companies 1. Pan-Elixir Ltd. is a pharmaceutical company. Its stock is fairly priced. Last year (t = 0), it paid a dividend of $2.50 per share to its shareholders. The company management has estimated that it will be able to maintain a constant growth rate in dividends of 3% per annum. 2. Rebound Tourism Inc. is a travel planning establishment. Its shares sold for an average price of $40 per share last year (t = 0) and the management estimates to maintain a constant growth rate in dividends. Last year, it paid a dividend of $0.50 per share to its shareholders. 3. Cheers Inc. is a beverage producer. It pays a dividend of $1 per share to its shareholders, which is likely to remain constant over…