Elexus Brooks- Bonus Assignment 1

How would you describe the relationship between a risky investment and the return on that investment (think stocks or retirement accounts)? a casual or limited relationship there is no relationship between the level of risk and the return you get on your investment a direct or positively correlated relationship an inverse or negatively correlated relationship

Question 1 a. What is the significance of a demand curve and a supply curve? b. Suppose $2,000 is borrowed at a simple interest rate of 8%. Calculate (i) the principal plus interest at the end of the 6th year? (ii) what will be the future value if the interest was compounded within the stated period? c. What is meant by the terms discounting and compounding? Why are these important in investment analysis? d. What is the difference between simple and compound interest? e. Compare the interest earned on $1,500 over: (i) 10 years at an interest rate of 8%, compounded yearly, and (ii) 10 years at an interest rate of 8%, compounded quarterly. f. Calculate the future value of the following investments. (1) $1,000 in 10 years at an interest rate of 8%, compounded annually. $15,000 in 8 years at an interest rate of 8%, compounded monthly. (ii)

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(a) You hold a two period bond that pays a coupon C at the end of each period. The interest rate is expected to be i for each of these periods. What is the price of the bond today? (b) The interest rate changes to i' in the second period. Evaluate the rates of return (using algebra) when you sell the bond after one period in the case of the change being 1. anticipated 2. unanticipated.

What is the expected return from an investment if there is a 20 percent chance of a 4 percent return, a 40 percent chance of a 8 percent return, and a 40 percent chance of a 12 percent return

TRUE OR FALSE: No need of long exlain 1. The longer the time before the revenues are received, the higher is the net present value of those revenues. 2. The more uncertain the future, the lower should be the discount factor in evaluating an investment. 3. In evaluating an investment, we do not discount the cost regardless of when the cost is incurred.

7. Why the price elasticities of demand and supply are very important? If there is a property investor which of the two markets should they choose and why? Which market is more risky? 8. A simple stock flow model - quick adjustment of rents discuss how the stock model operates if an exogenous factor affects the market.

“Risk-averse investor will never assume risk” - would you agree? Justify your stand. Also, explain the components of return of investment.

An agent (a financial institution or individual financial investor) that has agreed to deliver a specific asset (as yet unpossessed) to another party at a future date has:A. taken a long position.B. hedged against risk.C. entered a forward transactionD. taken a short positionE. bought an option.

1. Suppose you buy a share of stock for $10 and sell it for $20; your profit is thus $10. If that happens within a year, your rate of return is an impressive 100%. If it takes five years, what would be the annual rate of return on your investment?

Assume that the economy can experience high growth, normal growth, or recession. Under these conditions, you expect the following stock market returns for the coming year: State of the Economy High Growth Normal Growth Recession Probability 0.2 0.7 0.1 a. Compute the expected value of a $1,000 investment over the coming year. If you invest $1,000 today, how much money do you expect to have next year? What is the percentage expected rate of return? Return 45% 20% - 4% Instructions: Enter dollar values rounded to the nearest whole dollar and percentages rounded to one decimal place. The expected value is $ and the expected rate of return is b. Compute the standard deviation of the percentage return over the coming year. Standard deviation = = % % %. c. If the risk-free return is 7 percent, what is the risk premium for a stock market investment? Risk premium

Most investors would agree with the notion that they want to earn as much money on their investments as possible. a) List and explain the different investors that you may be aware of, and state and explain their investment objectives.     b) For the investor groups/classes identified in (a) above, what possible constraints do they have to contend with or face in their investment decision making process. List and explain the investor constraints they face.

3.) An investor is thinking of purchasing blue-chip stocks as part of his portfolio. At present, he is considering three blue chip stocks: Alpha, Bravo and Charlie. Based on the forecast of economists, there are three possible states of nature in the economy: growth, stagnation, recession, depression. Economists predicted that their respective probabilities are 0.25, 0.35, 0.30 and 0.10. Historical returns for the three blue chip stocks are summarized below: Stock Growth Stagnation Recession Depression Alpha 11% 3% -2% -20% Bravo 20% -1% -5% -3% Charlie 7% 2% 0% -5% (a) Determine the expected return for each stock. (b) Which stock is the riskiest using the standard deviation as a criterion? (c) Which stock is the least risky using the coefficient variation?

Please do your own work, don't copy from the internet   Q2)    2, You invest $3,000 for three years at 12 percent.   a. What is the value of your investment after one year? Multiply $3,000 × 1.12. b. What is the value of your investment after two years? Multiply your answer to part a by 1.12. c. What is the value of your investment after three years? Multiply your answer to part b by 1.12. This gives your final answer. Combine these three steps by using the formula  to find the future value of $3,000 in 3 years at 12 percent interest.

1) Suppose you buy one share of stock for $50 and sell it for $100. Your profit is $50. If that happens within a year, your rate of return is an impressive 100%! If it takes six years, what would be the average annual rate of return on your investment?