Chapter 4 - Financial Modeling - Template

Calculate CAPM for expected rate of return for the 3 company's in the chart Please show work   Ford Motor Company United Airlines Coca-cola Risk free rate 1.72% 1.72% 1.72% Beta 1.12 1.39 .0663 Return on market 6.44% 6.44% 6.44% Market risk premium 4.72% 4.72% 4.72% what are the differences and why?

Financial Forecast  This section outlines the projected financial statements. The financial statements should include detailed notes/explanations and assumptions to substantiate your projections. You can use imaginary numbers, however can you include a capital of $500,000 and a loan of $250,000 in the statments.  Please provide the Key assumptionsProvide the mentioned Financial statements:Income statementBalance sheetCash flow statementBreak-even analysis

Use the following information to calculate your company's expected return. State                    Probability                    Return Boom                         20%                           0.42 Normal                       60%                           0.13 Recession                   20%                          -0.19 Round to two decimal places.

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Use the following information to answer the question.    Based on above data, determine the expected return? Select one: a. 12.06% b. 19% c. 17.35% d. 16.72%

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View Policies Current Attempt in Progress Calculate the correlation coefficient (PA) for the following situation: (Round intermediate calculations and the final answer to 4 decimal place, e.g. 0.2921.) State of the economy High growth Moderate Recession Probability of Expected return on occurrence stock A in this state 47.0% 26.0% -14.0% 25% 20% 55% Correlation coefficient Expected return on stock B in this state 64.0% 34.0% -24.0%

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The following table lists possible rates of return on Company A and B. State of the Economy Probability Company A Deep recession 0.05 -20% Mild recession Average Mild boom Strong boom ii. 0.25 0.35 0.20 0.15 iii. 0 10 15 30 (a) Based on the above data calculate by using the appropriate formulae the standard deviations of returns for Company A and B i. the covariance of returns between Company A and B Company B -40% the correlation between Company A and B 10 0 25 30 (b) If you wish to diversify risk would it be advisable to form a portfolio of both securities A and B? State your reasons. (No computations are required to answer this part of the question.) (c) Find the minimum variance one can get by forming a portfolio of A and B. Short- selling either stock is allowed - i.e., weights need not be all positive.

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9. Consider the case of two financial assets and three market conditions (states). The table below gives the respective probability for each market condition and the return of each asset in each one of them. Market Conditions State Recession Normality Expansion Probability of state 10% 60% 30% Return of asset A -20% 20% 70% Return of asset B -10% 10% 35% a. Derive the expected returns and the standard deviation of returns for the two assets above. b. Consider the portfolio with 50% investment in each of the two assets above. Calculate the expected return and the standard deviation of the portfolio. c. Estimate the equation of the efficiency frontier.

Question 1 Fill the parts in the above table that are shaded in yellow. You will notice that there are nineline items.

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Use the following information to answer the question. Probability Outcome Return 20% 25% 55% -20% 15% 35% Recession Expansion Boom Based on above data, determine the expected return? Select one: a. 17.35% b. 16.72% c. 12.06% d. 19%

Compute the expected return given these three economic states, their likelihoods, and the potential returns:   Economic State                 Probability        Return Fast Growth                            0.3                    40% Slow Growth                           0.4                    15% Recession                              0.3                    -15%   Multiple Choice ___ 13.5 percent ___ 22.5 percent ___ 18.30 percent ___ 40.0 percent

Using the table below show and explain whether the two assets A and B are ideal for Hedging                      State of the world Probability   Return A Return B Expansion 25% 32% 5% Normal 50% 14% 15% Recession 25% 4% 25%

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Consider the following scenario analysis: Scenario Recession Normal economy Boom. Probability 0.20 Stocks Bonds 0.60 0.20 a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? b. Calculate the expected rate of return and standard deviation for each investment. c. Which investment would you prefer? Expected Rate of Return 1.3% 0.8 % Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate the expected rate of return and standard deviation for each investment. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place. Rate of Return. Bonds 14% 8% 4% Standard Deviation Stocks -5% 15% 25% 15.3 Answer is complete but not entirely correct. % 8.1 % Dequired A Required

Measuring risk and rate return) Given the following holding-period returns, calculate the average return for the market. Month Champ Inc. Market 1 2.8% 1.8% 2 3.2% 1.2% 3 9.0% 11.0% 4 -2.6% -1.0% 5 -2.9% -4.7% 6 12.0% 8.0% answer is 2.72%

Given the following information about past returns for Saphir Netmarketing, what is the standard deviation of returns? Year Return 1 12.00% 8.30% 3 -4.70% 4 -0.90% 5.70% O Type here to search