its important strategies: (1) rapidly acquiring profitable banks and (2) sustaining high returns while mitigating interest rate risk. Banc One has been very successful in acquiring banks, and much of this is done through the sale/transfer of Banc One’s stock. This strategy relies heavily on Banc One’s ability to maintain a high stock price. The second strategy – high returns with mitigated interest rate risk - relies heavily on the use of interest rate swaps. This use of interest rate swaps has
financial manager for Barnett Corporation, wishes to evaluate three prospective investments: X, Y, and Z. Sharon will evaluate each of these investments to decide whether they are superior to investments that her company already has in place, which have an expected return of 12% and a standard deviation of 6%. The expected returns and standard deviations of the investments are as follows: Investment Expected Return Standard deviation X 14%
each of your investments and see whether or not they are in line with your goals, let us first define the objective of your investment portfolio. Generally, we want a “Balanced” portfolio, which is “designed for investors who wish to benefit from greater capital appreciation potential through growth of principal. The objective is to balance the risk of inflation and market volatility. You, the investor are assume to have a modest return expectation with a moderate tolerance for market risk and volatility
Default Risk and the ways of identifying it in corporate bond market Introduction In bond market, there are a number of bonds offered for investors to purchase such as Treasury bonds, municipal bonds, mortgage securities and so on. Among these various bonds, one particular kind of bond is the corporate bond which attracts a wide range of investors with their higher return. However, there are no free lunches in financial market. Being accompanied by the high yield, the corporate bond investors
equity imply about the intrinsic value of PacifiCorp? The significant change in stock prices for Berkshire Hathaway and Scottish Power plc is partially due to the wide variety of products produced under these names. The approval of these investments and products are indicated by the overall market because they are creating value for both the buyer and the seller. Berkshire Hathaway is responsible for eight different types of product ranging from insurance and financial products to retail including
Lecture Handouts for Chapter 5 Chapter 5 is covered in lectures 31 and 32. Risk and Return The return from an investment is the change in market price, plus any cash payments received due to ownership, divided by the beginning price. The risk of a security can be viewed as the variability of returns from those that are expected. Measurement of Risk The expected return is simply a weighted average of the possible returns, with the weights being the probabilities of occurrence. The conventional
he explained that assets in an investment portfolio are not only to be selected on the basis of its merit but also by how it’s price changes relative to every other asset in the portfolio. Investment can be stated as a trade-off between expected return and risk, the riskier the investment the higher the return and vice versa. It allows us to make a decision to choose between the portfolio with either the highest rate of return or the lowest amount of risk. The risk of different stocks can be reduced
estimations. Also the cost of capital is a necessary basis for the expected growth and forecasted demand. The too high estimated cost of capital means that Midland may miss out on investment opportunities and will under value the investment at hand. Furthermore, it is possible for shareholders to see a lower return on their investment. On the other hand, a too low estimated cost of capital
Why invest in bonds when there are so many other options? Since 1999, the economy has been in a downward trend. The majority of people who had invested in the stock market now known as the great stock bubble or fraud bubble were given a false sense of security and they felt the market would just keep climbing. Were there signs that investors could have looked for to predict the economic downturn? If investors had looked for the signs, maybe they could have changed their direction of investment
of directors. The purchase was revealed yesterday in a filing with the Securities and Exchange Commission, and separately in a letter to Teletech’s CEO, Maxwell Harper. “The firm is misusing its resources and not earning an adequate return,” the letter said, “The company should abandon its misguided entry into comput-ers, and sell the Product and Systems Segment. Management must focus on creating value for shareholders.” Teletech issued