Week4_FIN2062a_Feb2_PracticeQs_Ch1516_Answers

Problem 1 Suppose your company wants to place an investment with a private equity firm with an amount of Php 200,000 for 2021. Considering all the risks involved, the prevailing discount rate is 12% and with a revenue stream/dividends below: 2022 5000 2023 6000 2024 7000 2025 8000 2026 9000 2027 10000 2028 11000 Determine the following: a. NPV for the period 2022 through 2028; b. Total NPV using manual computation; c. Total NPV using the Excel function; and d. IRR rate.

Questions 6 The performance (%) of one stock and one bond over the past four years is as follows: Return Return Return in 2018 Return in 2019 Return in 2020 Average standard in 2017 return deviation Stock Bond 20 -30 25 15 25.33 1 3 3.75 ? a) What is the average return of the stock? b) What is the standard deviation of the bond? c) What are the two lessons from the capital market history?

2 What is the Present Value of $10,000 invested in a 10-year US Treasury Note (semi-annual coupon) issued Oct. 1, 2018 with a coupon of 3.225 pct. if the Settlement Date was Oct. 4, 2018? Assume that the Maturity Date is Sept. 30, 2028, and that the current yield on securities of this type is 1.4810 pct. Show me your math (or your calculator entries).

Assume the risk-free rate on long-term Treasury bonds is 6.04%.  Assume also that the average annual return on the Winslow 5000 is 11% as the expected return on the market.  Use the SML equation (i.e., CAPM) to calculate the two companies' required returns.      Bartman   Industries   Reynolds Inc.   Year Stock Price Dividend Holding period return Stock Price Dividend Holding period return 2020 $17.25 $1.15   $48.75 $3.00   2019 14.75 1.06   52.30 2.90   2018 16.50 1.00   48.75 2.75   2017 10.75 0.95   57.25 2.50   2016 11.37 0.90   60.00 2.25   2015 7.62     55.75

QUESTION 2.b     Consider you are ready to make your first investment in the following three investment alternatives:   Alternative 1: Maxis bond that pays 10% on its par value in interest, sells for RM850, and matures in 12 years. For bonds of this risk class, you believe that a 12% rate of return should be required.   Alternative 2: Axiata preferred stock paying a dividend of RM6 and selling for RM40. Your required rate of return is 14%   Alternative 3: Digi common stock selling for RM50. The stock recently paid a RM5 dividend. The company’s return on equity is 16% and the company keeps 60% of the profits for reinvestment. You think a reasonable required rate of return for the stock is 18%.   Required: b. Based your answer in (a) choose the best alternative(s) for your investment and provide the reason.Note: No need excle formula , thank you

QUESTION 1 Suppose you purchased a stock a year ago. Today, you receive a dividend of $16 and you sell the stock for $99. If your return was 11%, at what price did you buy the stock? QUESTION 2 A stock's risk premium is equal to the: a. risk-free rate plus the expected market risk premium b. expected market risk premium times beta c. expected market return times beta d. treasury bill yield plus the expected market return.

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(a)As an investor, you are holding the following investments: Stock Amount invested  beta A $40 million  1.4 B $30 million  1.0 C $60 million  0.8 You are planning to sell the holdings of Stock B. The money from the sale will be used topurchase another $20 million of Stock A and another $10 million of Stock C. The risk-free rateis 7 percent and the market risk premium is 6.5 percent. How many percentage points higherwill the required return on the portfolio be after you complete this transaction?

Give typing answer with explanation and conclusion You are considering investing in DPN stock. Your broker reports to you the following information on retrospective returns Ri, and the stock Pi. What was the dividend receiced in 2017? Year i Ri Pi 2016 0.10 $2.20 2017 0.05 $2.10 2018 -0.10 $1.08 2019 0.025 $1.05 What was the dividend received in 2017?

Question 3: You are an active investor in the securities market and you have established an investment portfolio of two stock A and B five years ago. Required: a) If your portfolio has provided you with returns of 9.7%, -6.2%, 12.1%, 11.5% and 13.3% over the past five years, respectively. Calculate the geometric average return of the portfolio for this period?b) AssumethatexpectedreturnofthestockAinyourportfoliois14.6%.The risk premium on the stocks of the same industry are 5.8%, the risk-free rate of return is 5.9% and the inflation rate was 2.7. Calculate beta of this stock using Capital Asset Pricing Model (CAPM)? D) Assume that the following data available for the portfolio, calculate the expected return, variance and standard deviation of the portfolio given stock A accounts for 45% and stock B accounts for 55% of your portfolio?AB 12.5% 18.5%Expected returnStandard Deviation of return Correlation of coefficient (p) 0.415% 20%

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Problem Illustration 1: Valuing Bond Issue Consider a P1,000 par value bond issued by MERALCO with maturity date of 2026 and a stated coupon rate of 8.5%. On January 1, 2007, the bond had 20 years left to maturity, and the market's required yield to maturity for similar rated debt was 7.5%. Based on the market's required yield to maturity, what is the value of the bond? STEP 1: Timing and Amount of cash flows STEP 2: Determine the YTM discount rate STEP 3: Compute for the PV of cash flows 1 Bond Value = Interest (1 + YTM Market) + Principal (1 + YTM Market)" YTM Market

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A reputable company plans to place an investment with a private equity firm with an amount of Php 10M for 2023. Considering all the risks involved, the prevailing discount rate is 12% and with a revenue stream/dividends below: 2019:  995,000.00 2020: 1.380,000.00 2021: 1.575,000.00 2022: 1,930,000.00 2023: 2,954,000.00 2024: 3.408,644.00 2025: 6,354.941.00   What is the NPV?

Risk and return You are considering an investment in the stock market and have identified three potential stocks, they are Shanghai Fosun Pharmaceutical Group (HKG: 2196), China Petroleum & Chemical Corporation (HKG: 386) and Commonwealth Bank (ASX: CBA).  The historical prices between 2013 and 2020 in the table below, note that these prices are recorded on the 1st day of the year, for example, 1st of January 2020.  Students assume no dividend is distributed during this period and ignore the exchange rate conversion 1.Calculate the return and risk (standard deviation) of each stock.  Explain the relation (positive or negative) between risk and return based on your answers    2.Calculate the correlation coefficient between (a) Fosun and China Petroleum and (b) China Petroleum and CBA.    3.Calculate the expected (annual) return and standard deviation if you owned a portfolio consisting of 50% in Fosun and 50% in China Petroleum.    4.Calculate the expected (annual) return and…

Q. 1 £4.50, was held for a year and then sold for £6.20, and which paid a dividend at the end of the holding period of 20p? Q. 2 The risk-free return is 11 per cent, Company J has a beta of 1.8 and an expected return of 21 per cent. Calculate the risk premium for the market index over the risk-free rate assuming J is on the security market line. What is the holding- period return for a share which cost Q. 3 What is Probability Analysis?

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1.John owns shares of Tesla valued at $100,000 and shares of Amazon valued at $300,000 on Jan 1, 2021. Assume Tesla s expected return in 2021 is 22% and Amazon s is 18%. What is the expected return on the portfolio   19.40%     18.75%     21.00%     19.00%     20.25%

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An investor who bought money-market securities at a yield of 5.50% p.a. and sold the parcel for a few weeks later at a yield of 5.85% p.a. would earn: a interest b a capital loss c a capital gain  d. interest and a capital loss e. interest and capital gain.

You have the following share price of XYZ.   DATE Price 2-Mar-2021 $100 3-Mar-2021 $60 4-Mar-2021 $40 5-Mar-2021 $100   Investor A bought 100 shares of XYZ on 2-Mar-2021 and sold all the shares on 5-Mar-2021. Which answer is the closest value to the geometric average rate of return for the investor?   A. 15%   B. 20%   C. 25%   D. 0%