At the start of 2018, Gina had an estimated wealth of $150,000. During the year of $2018, she earned a total salary of $80,000, spent $30,000 and the value of her stocks fell by $20,000. What is the value of her wealth at the end of 2018? Group of answer choices $210,000 $200,000 $180,000 $100,000
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- Suppose Tyler decides to use $10,000 currently held as savings to make a financial investment. One method of making a financial investment is the purchase of stock or bonds from a private company. Suppose Warm Breeze, a cloud computing firm, is selling bonds to raise money for a new lab. This practice is called finance. Buying a bond issued by Warm Breeze would give Tyler the firm. In the event that Warm Breeze runs into financial difficulty, will be paid first. Suppose instead Tyler chooses to buy 250 shares of Warm Breeze stock. Which of the following statements are correct? Check all that apply. Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Tyler's shares to decline. The Dow Jones Industrial Average is an example of a stock exchange where he can purchase Warm Breeze stock. An increase in the perceived profitability of Warm Breeze will likely cause the value of Tyler's shares to rise. Alternatively, Tyler could undertake…Your retirement portfolio comprises 100 shares of the Standard & Poor's 500 fund (SPY) and 100 shares of iShares Barclays Aggregate Bond Fund (AGG). The price of SPY is $115 and that of AGG is $96. If you expect the return on SPY to be 10% in the next year and the return on AGG to be 5%, what is the expected return for your retirement portfolio?Stephanie Carter has been gifted a sum of $50,000 by her grandparents on completing her graduation successfully. She is a fresh finance graduate and is excited to invest some money in the capital market, for which she intends to use the gifted sum of $50,000. However, instead of committing this money to the market immediately, she decides to wait for some time, work in the field and acquire some experience before proceeding with her intended investment. She thus contemplates an extremely conservative investment in a portfolio of stocks and bonds, at the start of year 5 from now. For now, she will leave the $50,000 in a fixed deposit with the bank which promises an interest rate of 6% per annum. She will require a return of at least 9% on her stock investments and 4% on bond investments. Stephanie would have to pay 25% taxes on any interest income. Dividends will be tax-free. Stephanie’s research has allowed her to narrow down on the following investment candidates: Stocks:…
- Angie owns an endive farm that will be worth $90,000 or $0 with equal probability. Her Bernouilli utility function is u(w) =√w, where w is her wealth level (sum of initial wealth and the worth of the endive farm). 1. Suppose her firm is the only asset she has, that is, she has no initial wealth. What is the lowest price P at which she will agree to sell her endive farm before she knows how much it will be worth? 2. Redo part (1) assuming that she has $160,000 in her bank safe. 3. Compare and discuss your results in parts (1) and (2). What relationship can you find between Angie’s initial wealth level (zero versus $160,000) and her risk aversion?Which of the following statements is correct? a. Diversification is a useful method to reduce risk for a person who can divide up small amounts of a larger sum among a number of different choices. b. Flexibility is a useful method to reduce risk for a person who has to make all-or-nothing decisions by providing options to switch between choices as circumstances change over time. c. Real option arise in settings outside of financial markets. d. All of the above.The price of a bond with no expiration date is originally $1,000 and has a fixed annual interest payment of $150. If the price of the bond then falls by $100, what will be the interest rate yield to a new buyer of the bond? Multiple Choice 16.7 percent 8.4 percent 15 percent 13.6 percent 10 percent
- You and your workmates have come together to form an investment group called Pamodzi Investments; requiring each member to make monthly deposits into a pool account. You are planning to use these funds to create a portfolio of investments in preparation for your retirements.Todate, the balance in the pool account amounts to K1.5 million and you are about to make your first investment. However, there is a challenge due to different preferences of which securities to invest in. Others prefer money market securities on the back of strong recent performance. Those preferring capital securities are citing the fact that these are long term and appropriate for retirement planning.As a way towards consensus, a colleague proposes to consider the Collective Investment schemes that are available on the market. He has heard that this is a better way of accessing diversification benefits for small investors.As an Investment Analyst in the group, you have been approached by your colleagues to advise…Questions: Compute the expected intrinsic price of each stock in year 5. Assume that All stocks are fairly priced such that the intrinsic and market values are equal. Dividends are paid at the beginning of the year How many units of each stock will Stephanie buy? Support your response with relevant computations. What will be the total investment cost for shares? Show appropriate calculations. Which bonds are acceptable for investment? Justify your response with suitable computations. What will be the total cost of investment in bonds? Do the stock and bond investments fall within Stephanie’s investment guidelines? Show appropriate computations in support of your response. Will Stephanie have enough funds for her investment in stocks and bonds, when needed? What will be the surplus / shortfall, if any? Given that Stephanie’s bank offers an interest rate of 6% per year, what additional amount should she have deposited as a fixed…A firm is expected to pay a dividend of $1.35 next year and $1.50 the following year. Financial analysts believe the stock will be at their price target of $68 in two years.Compute the value of this stock with a required return of 10 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
- A manager must determine which of two products to market. From market studies, the manager constructed the following payoff matrix of the present value of all future net profits under all the different possible states of the economy: State of the economy Product 1 Product 2 Probability Profit ($) Probability Profit ($) Boom 0.2 50 0.2 30 Normal 0.5 20 0.4 20 Recession 0.3 0 0.4 10 The manager’s utility function for money is U = 100M – M2 where U is the total utility of money (in utils) and M refers to the dollars of profit. Determine if this manager a risk seeker, risk neutral, or a risk averter. Explain your answer. If the manager’s objective was profit maximization regardless of risk (أي دون أخذ المخاطرة بعين الاعتبار), which product should the manager introduces? Explain your answer. Evaluate the risk associated per dollar of profit with each product, i.e. find the coefficient of variation for each project.…Interest rate spread Suppose that a 5-year Treasury bond pays an annual rate of return of 2.9%, and a 5-year bond of the fictional company Risky Investment Inc. pays an annual rate of return of 7.3%. The risk premium on the Risky Investment bond is __________ percentage points. Consider an increase in the annual rate of return on the Risky Investment bond from 7.3 percent to 8.9 percent. Such a change would __________(NARROW/WIDEN) the interest rate spread on the Risky Investment bond over Treasuries to __________ . Which of the following explains the increase in the annual rate of return on the Risky Investment bond? a. The expected default rate on the Risky Investment bond has decreased. b. The expected default rate on the Treasury bond has increased. c. The expected default rate on the Treasury bond has decreased. d.The expected default rate on the Risky Investment bond has increased. NOTE- This is one question but it is divided into…What is the difference if any between an individual gambling at a casino and gambling by buying a stock? What is the difference for society? For an individual, gambling at a casino or by buying a stock A. is the same because they have the same expected values. B. is the same insofar that both involve uncertain outcomes C. different because the expected value of gambling in a casino is higher. 2. For society, gambling at a casino or by buying a stock A. is the same because neither redistribute income. B. is different because buying a stock more directly provides capital for companies to make productive investments. C. is the same because both have no effect on the budget deficit.