4. Use the information given below to determine if the following securities are correctly priced, assuming that R, = 5% and R = 10%. A в Current price (P,) S50 80 100 Next year price (P,) $54 84 120 Dividend (D,) $2 4 5 Beta 0.8 1.2 3.0 If you were offered a 20-30-50 portfolio of the above securities as a package deal, will you take it? Why?
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- Consider the following data for two risk factors (1 and 2) and two securities (J and L):λ0 = 0.07 λ1 = 0.04 λ2 = 0.06bJ1 = 0.10 bJ2 = 1.60 bL1 = 1.80 bL2 = 2.45a. Compute the expected returns for both securities. b. Suppose that Security J is currently priced at $50 while the price of Security L is $15.00.Further, it is expected that both securities will pay a dividend of $0.95 during the coming year.What is the expected price of each security one year from now? c. Compute the correlation between stock A and stock B considering the following data.Standard deviation of stock A = 10 percentStandard deviation of stock B = 17 percentCovariance between the two stocks = 90.The following facts are available about a convertible bond: Market Price of issuer's common stock = S = 100, uS = 110, dS = 90, Interest Rate = 3%, Face Value of a Convertible Bond (E) = 1,000. Using the One Period Binomial Model to create a replicating portfolio, calculate the price of this convertible bond. a. $1,001.67 b. $1,018.51 c. $1,033.98 d. $1,041.15 Do it correctly with step by step explanation.Consider the following zero coupon bonds:Bond Yrs to Mat. Yield to Maturitya 1 0.0433b 2 0.046c 3 0.0495d 4 0.0511e 5 0.0531f 6 0.0555What is the forward rate for year5 Group of answer choices 0.0630 0.0593 0.0648 0.0611 0.0668 Please answer fast i give you upvote.
- Show how you would make a portfolio delta-neutral and also self-financing by including bonds and call options to a stock that is currently traded at sh. 100, given that the delta for the call = 0.2499 and the call price = sh5.55.Assume that the current yield on one-year securities is 7 percent, and that the yield on a two-year security is 8 percent. If the liquidity premium on a two-year security is 0.6 percent, then the one-year forward rate is approximately: Group of answer choices 8.6 percent. 7.4 percent. 8.4 percent. 7.6 percent.The following data apply to Saunders Corporation's convertible bonds: Maturity: 10 Stock Price: $30.00 Par value: $1,000.00 Conversion price: $35.00 Annual coupon: 5.00% Straight-debt yield: 8.00% What is the bond's straight-debt value? Based on your answers to the three preceding questions, what is the minimum price (or "floor" price) at which the Saunders' bonds should sell? Please solve the problem by using algebra and formulas instead of excel.
- What should be the prices of the following preferred stocks if comparable securities yield 4 percent? Use Appendix B and Appendix D to answer the questions. Round your answers to the nearest cent. MN, Inc., $8 preferred ($120 par) $ CH, Inc., $8 preferred ($120 par) with mandatory retirement after 7 years $ What should be the prices of the following preferred stocks if comparable securities yield 8 percent? Round your answers to the nearest cent. MN, Inc., $8 preferred ($120 par) $ CH, Inc., $8 preferred ($120 par) with mandatory retirement after 7 years $ In which case did the price of the stock change? As with the valuation of bonds, an increase in interest rates causes the value of preferred stock to -Select-fallriseItem 5 . In which case was the price more volatile? While the prices of both preferred stocks -Select-declinedincreasedItem 6 , the price of the -Select-perpetual preferred stockstock with mandatory retirementItem 7 was more volatile.Suppose a stock is currently (time t = 0) worth 100. Further, suppose the one year annually compounded interest rate is 2%, and the two year annually compounded rate is 3%. Find the following:a) The forward price for a forward contract on the stock with maturity year T1 = 1. b) The forward price for a forward contract on the stock with maturity year T2 = 2.c) The forward price for a forward contract with maturity T1 = 1 on a ZCB with maturity T2 = 2.d) The forward price for a forward contract with maturity T1 = 1 on a forward contract on the stock with maturity T2 = 2 and delivery price K = 101.What should be the prices of the following preferred stocks if comparable securities yield 8 percent? Use Appendix B and Appendix D to answer the questions. Round your answers to the nearest cent. a. MN, Inc., $7 preferred ($200 par) b. CH, Inc., $7 preferred ($200 par) with mandatory retirement after 20 years
- What should be the prices of the following preferred stocks if comparable securities yield 3 percent? Use Appendix B and Appendix D to answer the questions. Round your answers to the nearest cent. MN, Inc., $10 preferred ($90 par) $ CH, Inc., $10 preferred ($90 par) with mandatory retirement after 11 years $The following information pertains to a portfolio of a company on 12/31/21: Security Cost at 12/31/21 Fair value at 12/31/21 X $220,000 $159,000 Y 246,000 190,000 Total: (figure out the total on your own) What is the balance of the Fair Value Adjustment account for these securities at December 31, 2021? (Very Important: just enter the amount. DO NOT put a plus or minus sign in front of the amount.)A non-dividend-paying stock has a current price of 800 ngwee. In any unit of time (t, t + 1) the price of the stock either increases by 25% or decreases by 20%. K1 held in cash between times t and t + 1 receives interest to become K1.04 at time t + 1. The stock price after t time units is denoted by St.Required:I. Calculate the risk-neutral probability measure for the model.II. Calculate the price (at t = 0) of a derivative contract written on the stock with expiry date t = 2 which pays 1,000 ngwee if and only if S2 is not 800 ngwee (and otherwise pays 0).