1.Ur CEO believes that economy will go to a recession. Which of the following benchmarks will he choose to implement for his bearish view ? 50 Treasury 50 HY 100% HY 30 Treasury 40 equity 30 HY NONE OF THE ABOVE
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1.Ur CEO believes that economy will go to a recession. Which of the following benchmarks will he choose to implement for his bearish view ?
50 Treasury 50 HY |
||
100% HY |
||
30 Treasury 40 equity 30 HY |
||
NONE OF THE ABOVE |
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- Which of the following is a diversifiable risk? Multiple Choice The risk that the economy will go into a recession The price of oil rising The risk that a company's CEO is killed in a plane crash Inflation The corporate tax rate rising by 5%JunJun & Co. has debt ratio of 0.50, a total asset turnover of 0.25 and a profit margin of 10%. The president is unhappy with the current return on equity, and he thinks it could be doubled. This could be accomplished (1) by increasing the profit margin to 14% and (2) by increasing debt utilization. Total assets turnover will not change. What new debt ratio, along with the 14% profit margin, is required to double the return on equity? (SHOW SOLUTION) a. 0.75 b. 0.70 c. 0.65 d. 0.55The pandemic issue due to covid19 has brought many economies at lower ebb. It has created impact on financial and non-financial markets. But the economists are quite hopeful about economic recovery and their estimations are a kind of hope for all investors. Mr. Akhan is quite hopeful about stock market recovery hence he plans to invest 20 percent of his wealth in stock market. With assistance of team he has finalized to choose one of the following options. Kindly help him in making decision: PSO – Stock Company is currently undergoing expansion and is not expected to change its cash dividend for the next 4 years the last dividend paid was PKR 3. Having completed expansion targets, higher earnings are expected to result causing a 30% increase in dividends each year for 3 years. After these three years of 30% growth, the dividend growth rate is expected to be 2% per year forever. Nestle Pakistan – Stock Company has reputation of having stable dividend policy. Company shall pay…
- The pandemic issue due to covid19 has brought many economies at lower ebb. It has created impact on financial and non-financial markets. But the economists are quite hopeful about economic recovery and their estimations are a kind of hope for all investors. Mr. Akhan is quite hopeful about stock market recovery hence he plans to invest 20 percent of his wealth in stock market. With assistance of team he has finalized to choose one of the following options. Kindly help him in making decision: PSO – Stock Company is currently undergoing expansion and is not expected to change its cash dividend for the next 4 years the last dividend paid was PKR 3. Having completed expansion targets, higher earnings are expected to result causing a 30% increase in dividends each year for 3 years. After these three years of 30% growth, the dividend growth rate is expected to be 2% per year forever. Nestle Pakistan – Stock Company has reputation of having stable dividend policy. Company shall pay…We Do Bankruptcies is a law firm that specializes in providing advice to firms in financial distress. It prospers in recessions when other firms are struggling. Consequently, its beta is negative, −0.3. a. If the interest rate on Treasury bills is 4% and the expected return on the market portfolio is 14%, what is the expected return on the shares of the law firm according to the CAPM? (Enter your answer as a whole percent.) b. Suppose you invested 70% of your wealth in the market portfolio and the remainder of your wealth in the shares in the law firm. What would be the beta of your portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)Consider the following scenario analysis: Scenario Recession Normal economy Boom Probability 0.20 0.50 0.30 Rate of Return Stocks -4% 18% 29% Bonds 16% 9% 6% 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?
- 1a. Consider the statement that an asset with higher risk must earn higher risk premium. Is it true or false? Please explain. b) A company with growth opportunities has dividend growth every year. Do you agree or not? Please explain. c) The Trump administration lowered corporate tax rate and this is a monetary policy. Is it true or false? If false, what type of policy is it.Stock A is expected to return 14 percent in a normal economy and lose 21 percent in a recession. Stock B is expected to return 11 percent in a normal economy and 5 percent in a recession. The probability of the economy being normal is 75 percent with a 25 percent probability of a recession. What is the covariance of these two securities? A) .007006 B) .005180 C) .006274 D) .003938 (Don't Hand writing in solution) .Q : The pandemic issue due to covid19 has brought many economic at lower ebb.It has created impact on financial and non-financial markets.But the Economists are quite hopeful about economic recovery and their estimations are a kind of hope for all investors.Mr . Akhan is quite hopeful about stock market recovery hence he plans to invest 20 percent of his wealth in stock market.With assistance of team he has finalized to choose one of the following options.kindly help him in making decision: PSP - Stock Company is currently undergoing expansion and is not expected to change its cash dividend for the next 4 years the last dividend paid was PKR 3. Having completed expansion targets, higher earnings are expected to result causing a 30% increase in dividends each year for 3 years. After these three years of 30% growth, the dividend growth rate is expected to be 2% per year forever. Nestle Pakistan - Stock Company has reputation of having stable dividend policy. Company shall pay…
- Suppose the Board of Directors of Baldwin mandates that management take measures to increase financial leverage next year. Assuming revenue and profits remain the same, and assets are reduced by 20% through efficiency gains. What will the next year's ROE be if leverage increases by 20%? Baldwin currently ROE is 3.1 Group of answer choices A) 7.8% B) 12.9% C) 4.65% D) 10.3%You are given the following information: State of Economy Probability ofState of Economy Rate of ReturnIf State Occurs Depression .07 −.097 Recession .17 .067 Normal .42 .138 Boom .34 .219 Calculate the expected return. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return % Calculate the standard deviation. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Standard deviation %Junjun Co. has debt ratio of .50 , total assets turnover of 0.25 , and a profit margin of 10%. The president is unhappy with the current return on equity , and he thinks it could be doubled . This could be accomplished (1) by increasing the profit margin to 14% and (2) by increasing debt utilization. Total assets turnover will not change. What new debt ratio along with the 14% profit margin is required to double the return on equity ? a. 0.75 b. 0.65 c. 0.70 d. 0.55