Case Study 1_ Retirement Plan

PLEASE ANSWER ALL THE QUESTIONS Question 1  Fill the parts in the above table that are shaded in yellow. You will notice that there are nine line items.  Question 2  Using the data generated in the previous question (Question 1);a) Plot the Security Market Line (SML)  b) Superimpose the CAPM’s required return on the SML  c) Indicate which investments will plot on, above and below the SML?  d) If an investment’s expected return (mean return) does not plot on the SML, what does it show? Identify undervalued/overvalued investments from the graph  Question 3  From the information generated in the previous two questions; a) Identify two investment alternatives that can be combined in a portfolio. Assume a 50-50 investment allocation in each investment alternative. b) Compute the expected return of the portfolio thus formed. c) Compute the portfolio’s beta. Is the portfolio aggressive or defensive?

P 9-2 Investment Scenarios (LO 9-3) Arkansas Best Freightways is considering a purchase of three different potential trucks but is uncertain of the cash inflows associated with the following investment scenarios. Year Year 0 (today) Year 1 Year 2 Year 3 Year 4 Buy new truck Increased profits Increased profits Increased profits Increased profits Investment 1 (85,000) 25,000 25,000 25,000 25,000 Investment 2 (105,000) 20,000 30,000 40,000 50,000 Investment 3 (125,000) 40,000 30,000 20,000 10,000

Please answer all questions

annuity due The only kind of interest rate that can be used in the interest Choose a match formulas engineering economy Type of annuity where the series of payments continue indefinitely Choose a match geometric gradient Application of engineering or mathematical analysis and synthesis to economic decisions Choose a match interest A graphical representation of cashflows drawn on a time Choose a match principal scale perpetuity Amount of money paid for the use of borrowed capital Choose a match cash flow diagram Type of annuity where the payments are made at the end of each period beginning on the first period Choose a match break even chart A series of equal payments occurring at equal interval of time. Choose a match ordinary annuity a series of payments where annual payments increase or decrease over time, by a constant percentage Choose a match compound interest

Course: FinanceAs a great investor, you are interested in 3 assets to invest: A, B and C. A financial advisor tells you that the returns on the assets are independent of each other, and you are given the following data: Asset A B C E(Ri) 0.05 0.035 0.06 Variance 0.0015 0 0.008 You have not yet analyzed what your degree of risk aversion (A) is, but you know that your utility function behaves as follows: U[ E(Rp)] = E(Rp) - 0.5 * A * Variance. (See attached image for a better understanding) You are asked to:(a) Find the optimal portfolio with these 3 assets {called wA, wB and wC}.b) Calculate the expected return and risk of the optimal portfolio for the following degrees of risk aversion (A):(i) A = 5(ii) A = 10(iii) A = 16   Please ASAP

Select all of the time value of money factors that are known in a NPV assessment. O Present value of single-sums O Present value of annuities O Interest rate Number of periods O Future value of single-sums O Future value of annuities

1. If you perform a NPV analysis on a perspective investment using a "d" = 15% and:       a. the NPV Is < 0, what can you tell me about the investment's IRR (time adjusted rate of return)?       b. the NPV is > 0, what can you tell me about the investment's IRR (time adjusted rate of return)?        c. the NPV is= 0, what can you tell me about the investment's IRR (time adjusted rate of return)?          2. We presume in Investment analysis that the payback method of evaluation is a better measure of.................than it is a measure of...................... We also think less of the payback method because it sometimes ignores the............., ..................of an investment since the................. the oftentimes occurs after the payback period has lapsed.        3. Please explain why we oftentimes equate EBITDA (earnings before subtracting] interest, taxes, depreciation & amortization) with NOI (net operating income) in examining business' profitability. Why don't…

Future Value of an Annuity Refer to each case in the table below to answer what is required in this problem. Required: Find the future value of the annuity, assuming that it is  (1) An ordinary annuity.  (2) An annuity due. Compare your findings in parts a(1) and a(2). All else being identical, which type of annuity—ordinary or annuity due—is preferable? Explain why.

The probability distributions of expected returns for the assets are shown in the following table: Asset A Prob Return 0.2 -5% 0.4 10% 0.4 15% a) Calculate the expected return for asset A. b) Calculate the standard deviation for asset A.

A life insurance policy is a financial asset, with the premiums paid representing the investment’scost.a. How would you calculate the expected return on a 1-year life insurance policy?b. Suppose the owner of a life insurance policy has no other financial assets—the person’sonly other asset is “human capital,” or earnings capacity. What is the correlation coefficientbetween the return on the insurance policy and the return on the human capital?c. Life insurance companies must pay administrative costs and sales representatives’commissions; hence, the expected rate of return on insurance premiums is generallylow or even negative. Use portfolio concepts to explain why people buy life insurancein spite of low expected returns.

Use the following table to calculate the expected return from the asset. Return Probability 0.1      0.25     0.2      0.5     0.25      0.25       20.00% 18.75% 17.50% 15.00%

Please answer fast I will rate for you sure....

You are given the following data about Asset A and Asset B.                                                                           Asset A                 Asset B                               Expected returns                    8.6%                   7.9%                               Standard Deviation                3.8%                   4.6%                 Assuming that an investor is to choose between Asset A or Asset B, explain which asset               a rational investor will choose.     c) With the use of a diagram, explain why an investor will always choose a point on the              SML line.

Question 1 Fill the parts in the above table that are shaded in yellow. You will notice that there are nineline items.  Question 2Using the data generated in the previous question (Question 1);a) Plot the Security Market Line (SML) b) Superimpose the CAPM’s required return on the SML c) Indicate which investments will plot on, above and below the SML? d) If an investment’s expected return (mean return) does not plot on the SML, what doesit show? Identify undervalued/overvalued investments from the graph

Berdasarkan informasi tersebut a. Expected return Asset A b. Standard Deviation Asset A dan Asset B c. Portfolio AB Expected Return. d. Coefficient Correlation AB e. Portofolio AB Standard Deviation Please explain by Microsoft excel

A decision maker has prepared the following payoff table. States of Nature High 95 Alternative Low Buy 10 Rent 65 35 Lease 45 50 Prior Probability 0.8 0.2 Using Baye's Decision Rule, what is the best decision and the expected payoff? (Round your answer to 1 decimal place.) Best decision Payoff

What can you calculate with the Excel argument FV?   Number of periods of time for a loan or investment. Interest rate. Future value of an investment based on a constant interest rate. The constant periodic payment required to pay off a loan or investment.

Time value of money question: Envision you are approached with an investment opportunity. You aregiven two alternatives to choose from. Investment A has a higher interest rate than Investment B.Investment A requires a greater number of periods until you receive the benefit than Investment B.                 Applying concepts from the PV = FV/(1+r)^n (the NPV formula and discounting) describe the process ofhow you would decide which investment option would be better to invest in. Discussing how changes inboth the interest rate and the number of periods would affect this decision will help.

What does the Excel argument Nper refer to? Number of periods of time for a loan or investment. The constant periodic payment required to pay off a loan or investment. Periodic interest rate. Present value of an investment.

The series of returns of a single investment are presented as follows; Beginning value 100 115.0 138.0 Year 1 2 3 End value 115.0 138.0 110.4 i. compute the Arithmetic mean of the investment. ii. calculate the Geometric mean of the investment. iii. With an appropriate illustration argue which one of the two measures issupe

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The following investments and probabilities are presented:                                   INVESTMENT 1                   Years yield probability                 1 11 0.25                 2 13 0.25                 3 19 0.10                 4 16 0.20                 5 15 0.20                                                             INVESTMENT 2                   Years yield PROBABILITY                 1 18 0.15                 2 16 0.15                 3 11 0.40                 4 10 0.15                 5 11 0.15                                       1 Calculate the expected return on each investment             2 Calculate the standard deviation of both investments and indicate which investment is riskier and why?   3 Calculate the coefficient of variation of both investments and indicate which investment is riskier and why?   In this case it is…

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When comparing investments with different horizons, the ____________ provides the more accurate comparison. A. effective annual rate B. average annual return C. historical annual average D. arithmetic average

Present Value of an Annuity Find the present value of the following ordinary annuities. (Notes: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in many situations, to see how changes in input variables affect the output variable. Also, note that you can leave values in the TVM register, switch to Begin Mode, press PV, and find the PV of the annuity due.) Do not round intermediate calculations. Round your answers to the nearest cent. $800 per year for 10 years at 8%. $   $400 per year for 5 years at 4%. $   $800 per year for 5 years at 0%. $   Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities…