Top hedge fund manager Diana Sauros believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $56. The stock will pay a dividend at year-end of $4.00. Assume that risk-free Treasury securities currently offer an interest rate of 1.9%. Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2013 (figures in percent per year) are as follows. Portfolio Avg Annual Rate Average Premium (extra return of Return versus treasury bills) Treasury bills 3.9 Treasury 5.2 Bonds Common Stocks 11.5 1.3 7.6 What is the discount rate if the interest rate is 4.0% ? (Enter your answer as a percent rounded to 2 decimal places.) Discount rate 6=? What price should she be willing to pay for the stock today? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock price $ =?
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- Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $50. The stock will pay a dividend at year-end of $2. Assume that risk-free Treasury securities currently offer an interest rate of 2%. Average rates of return on Treasury bills, government bonds, and common stocks, 1900–2017 (figures in percent per year) are as follows. Portfolio Average AnnualRate of Return (%) Average Premium (Extra returnversus Treasury bills) (%) Treasury bills 3.8 Treasury bonds 5.3 1.5 Common stocks 11.5 7.7 a. What is the discount rate on the stock? (Enter your answer as a percent rounded to 2 decimal places.) b. What price should she be willing to pay for the stock today?Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $46. The stock will pay a dividend at year-end of $3.00. Assume that risk-free Treasury securities currently offer an interest rate of 2.4%. Average rates of return on Treasury bills, government bonds, and common stocks, 1900–2017 (figures in percent per year) are as follows. ortfolio Average AnnualRate of Return (%) Average Premium (Extra returnversus Treasury bills) (%) Treasury bills 3.8 Treasury bonds 5.3 1.5 Common stocks 11.5 7.7 1. What is the discount rate on the stock? (Enter your answer as a percent rounded to 2 decimal places.) 2. What price should she be willing to pay for the stock today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $49. The stock will pay a dividend at year-end of $3.00. Assume that risk-free Treasury securities currently offer an interest rate of 2.1%. Average rates of return on Treasury bills, government bonds, and common stocks, 1900–2020 (figures in percent per year) are as follows. Portfolio Average Annual Rate of Return (%) Average Premium (Extra return versus Treasury bills) (%) Treasury bills 3.7 Treasury bonds 5.4 1.7 Common stocks 11.5 7.7 What is the discount rate on the stock? Note: Enter your answer as a percent rounded to 2 decimal places. What price should she be willing to pay for the stock today? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
- I need someone to check my answer Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $49. The stock will pay a divided at year-end of $3.00. Assume that risk-free Treasury securities currently offer an interest rate of 2.1% Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2017 (figures in percent per year) are as follows Portfolio Average Annual Rate of Return (%) Average Premium (Extra return versus Treasury bills) (%) Treasury bills 3.8 Treasury bonds 5.3 1.5 Common stocks 11.5 7.7 What is the discount rate on the Stock? 7.7%+ 2.1% =9.8% What price should she be willing to pay for the stock today? Price= ($3.00 + $49)/ (1+0.098) = $47.36The attached file contains hypothetical data for working this problem. Goodman Corporation’s and Landry Incorporated’s stock prices and dividends, along with the Market Index, are shown in the file. Stock prices are reported for December 31 of each year, and dividends reflect those paid during the year. The market data are adjusted to include dividends. The risk-free rate on long-term Treasury bonds is 8.04%. Assume that the market risk premium is 6%. What is the expected return on the market? Now use the SML equation to calculate the two companies' required returns.You have funds invested in a mutual fund of S&P 500 stocks. Over the last 5 years, the annual percent returns of the S&P 500 are 19.58%, −6.30%, 28.94%, 16.32%, and 14.55%. What is the average annual percent return on the S&P 500 stocks over the last 5 years? The average annual percent return?? (the answer is not 14.62%)
- ou plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks: Stock Investment Stock's Beta Coefficient A $160 million 0.5 B 120 million 1.5 C 80 million 1.8 D 80 million 1.0 E 60 million 1.4 Kish's beta coefficient can be found as a weighted average of its stocks' betas. The risk-free rate is 3%, and you believe the following probability distribution for future market returns is realistic: Probability Market Return 0.1 -25 % 0.2 0 0.4 13 0.2 30 0.1 51 What is the equation for the Security Market Line (SML)? (Hint: First determine the expected market return.) ri = 0.8% + (10.8%)bi ri = 0.8% + (12.3%)bi ri = 3.0% + (10.8%)bi ri = 2.3% + (10.2%)bi ri = 3.0% + (12.3%)bi Calculate Kish's required rate of return. Do not round intermediate calculations. Round your answer to two decimal places. % Suppose Rick Kish, the president, receives a proposal from a company seeking new capital. The amount…What is the value of a common stock if: a. the firm's earnings and dividends are growing annually at 4 percent, the current dividend is $1.32, and investors require 8 percent return on investments in common stock? b. What is the value of this stock if you add risk to the analysis and the firm's beta coefficient is 0.8, the risk-free rate is 1.5 percent, and the return on the market is 8.5 percent? c. If the price of the stock is $35, what is the rate of return offered by the stock? Should the investor acquire this stock?Among the following types of investments, small-company stocks, large-company stocks, long-term corporate bonds, long-term government bonds, and U.S. Treasury bills, small-company stocks had a risk premium of 13.2 percent for the past 90 years. What does the term "risk premium" mean? Is the risk premium on small-company stocks considered to be relatively high or relatively low when compared to other investment classes? Explain why.
- Please explain using Excel and show/explain formulas. Percival Hygiene has $10 million invested in long-term corporate bonds. This bond portfolio’s expected annual rate of return is 8%, and the annual standard deviation is 10%. Amanda Reckonwith, Percival’s financial adviser, recommends that Percival consider investing in an index fund that closely tracks the Standard & Poor’s 500 index. The index has an expected return of 13%, and its standard deviation is 14%. a. Suppose Percival puts all his money in a combination of the index fund and Treasury bills. Can he thereby improve his expected rate of return without changing the risk of his portfolio? The Treasury bill yield is 3%. multiple choice Yes No b. Could Percival do even better by investing equal amounts in the corporate bond portfolio and the index fund? The correlation between the bond portfolio and the index fund is +0.3. multiple choice Yes NoThe following is part of the computer output from a regression of monthly returns on Waterworks stock against the S&P 500 Index. A hedge fund manager believes that Waterworks is underpriced, with an alpha of 1% over the coming month. Beta R-square Standard Deviationof Residuals 0.75 0.65 0.05 (i.e., 5% monthly) Required: a-1. If he holds a $12.0 million portfolio of Waterworks stock and wishes to hedge market exposure for the next month using one-month maturity S&P 500 futures contracts, how many contracts should he enter? The S&P 500 currently is at 2,000 and the contract multiplier is $50. a-2. Should he buy or sell contracts?multiple choice Sell Correct Buy b. Assuming that monthly returns are approximately normally distributed, what is the probability that this market-neutral strategy will lose money over the next month? Assume the risk-free rate is 0.8% per month. (Do not round intermediate calculations. Round your percentage answer to 2…You’ve observed the following returns on SkyNet Data Corporation’s stock over the past five years: 19 percent, 24 percent, 11 percent, −9 percent, and 13 percent. Suppose the average inflation rate over this period was 3.6 percent and the average T-bill rate over the period was 4.1 percent.a. What was the average real return on the company’s stock?b. What was the average nominal risk premium on the company’s stock?