What is idiosyncratic risk? How does it differ from market risk?

Q: Carol has two job offers.One pays $655 per week, and the other pays $2,800 per month. Which is the…

A: As the given offers are not comparable,  we can convert them into annual terms.   Option 1 : $655…

Q: Based on a modified duration of 4.1141, the price of the bond should increase by approximately…

A: Modified duration = 4.1141 Increase in YTM = 1.00%     Modified duration means expected percentage…

Q: ctly negatively correlated risky securities A and B. A has an expected rate of return of 12% and a…

A: A minimal variance portfolio is a strategy for maximising returns while minimising risk.It entails…

Q: Compute the present value of a perpetual investment that would pay P25,000 every year if the…

A: To calculate the present value we will use the present value of perpetuity formula as follows:…

Q: Joe Pierce has been offered the opportunity of investing $178,556.90 now. The investment will earn…

A: Initial investment = $178,556.90 Interest rate = 0.08 Accumulated value = $500,000 Period = ?…

Q: A 25-year coupon bond pays an annual coupon of 5 and has a face value of 100. If the current price…

A: Annual Interest = 5% FV = Face Value of the Bond = 100 Price = Current Market Price = 100 Maturity =…

Q: The stock of Yakir Development has a beta of 1.31. The risk-free rate of return is 1.5 percent and…

A: To calculate the risk premium on this stock we will use following formula   Premium on this stock =…

Q: Based on the information provided below, estimate the correlation coefficient of returns between the…

A: Correlation coefficient (CC) is a statistical measure which is used to measure the closeness of two…

Q: What does it mean when a person is unbanked? And how does fintech actually integrate themselves into…

A: Financial technology is a combination of technology and innovation aimed at competing with…

Q: a. If the first payment is made four years from now, what is this grand prize really worth today?…

A: Present Value is the value of money in today at zero period for all the payments which is received…

Q: The Tech company. Inc. is currently making windfall profits from the sales of financial programming…

A: "Hi, Thanks for the Question. Since you asked multiple sub parts question, as per authoring…

Q: t with the required rate of return of 11.2% provides annual cash flows of $2,810 during the years 1…

A: IRR of project is internal rate of return at which present value of cash flow is equal to initial…

Q: y a dividend each year in the future of 40 and has a current price of 1000. Assuming Shiller’s…

A: The required rate on the stock depends on the dividend paid and corresponding price of stock…

Q: The following statements relate to derivatives. Which of the following is FALSE? a. Swaps may have…

A: Options are contingent claims, while swaps and future contract are forward commitments. This implies…

Q: What is the present value of a 6% investment that would pay P30,000 annually perpetually?

A: To calculate the present value we will use present value of perpetuity formula as follows:   Present…

Q: A solid waste disposal company borrowed money at 10% pe and other equipment needed at the…

A: The principal amount would the present value of single payment done after 2 years considering the…

Q: An equipment has an original cost and book value of 2,100,000 and 1,560,000 respectively. It has…

A: Sound value of an asset is the depreciated replacement cost of the asset. This value differs from…

Q: A proposed acquisition may create synergy by:             I. increasing the market power of the…

A: Synergy is an important aspect of mergers and acquisitions. Synergy refers to all forms of benefits…

Q: The duties of an agent when filling out an application include all of the following EXCEPT:    A:…

A: Ans: (b)  Help the insured make up creative answers to stretch the truth about a past health issue…

Q: ABC Co. has recently purchased ordinary shares of XYZ Co, one of its competitors, as part of a…

A: a. Call option is purchased when the share price of a company is expected to increase in the future.…

Q: 22) The current exchange rate is 0.85 euros per dollar, but you believe the dollar will decline to…

A: The expected exchange rate between two currencies in the spot market on a specified future date. It…

Q: company's discount rate is 12%, then the net present value for this investment is closest to:…

A: NPV= Present value of cashinflows - Present value of cashoutflows.

Q: ABC Co. believes that XYZ Corporation’s stock price is going to decline from its current level of…

A: The put option is the option that gives the buyer the choice but not the obligation to sell the…

Q: The current exchange rate between the Japanese yen and the U.S. dollar is ¥90 per dollar. If the…

A: The exchange rate is the rate at which one currency can be bought for another. Depreciation of a…

Q: ATEch has fixed costs of $8 million and profits of $5 million. Its competitor ZTech is roughly the…

A: Operating leverage is a cost-accounting metric that determines how an entire lot a business…

Q: A 2300 note with interest is repaid after 90 days with a check for 2,374.75 What was the interest…

A: Interest Amount = P * R * TWhere P = PrincipalR = Rate of InterestT = Time Period…

Q: A project has an initial cost of $50 000, net annual cash inflows of $20 000, and a $2 000 salvage…

A: Rate of return is the return on the profit on investment, It can change the value of investment,…

Q: An analyst is studying the movement of the stock Shrek. His research and came up with a different…

A: Probability of strong economy = 0.30 Probability of normal economy = 0.50 Probability of weak…

Q: A way of spreading out the risk associated with expensive and/or dangerous business ventures among…

A: There are certain businesses that can have high risk high return profile. The business might be…

Q: The SWEET Corp. is considering the purchase of a new piece of equipment. The cost savings from the…

A: The IRR is the rate which equates the Present value of Cash Outflow to Present value of Cash Inflow.…

Q: You read in The Wall Street Journal that 60-day T-bills are currently yielding 9.5%.  Your…

A: As there is no probability of loss in these type of risk free rate thus it is free from any kind of…

Q: Only answer question 1 to 3 You are a personal finance advisor at the BQ bank, and you receive in…

A: A mortgage is a loan on a property where the collateral is the property itself.

Q: Hardware Co. is estimating its optimal capital structure. Hardware Co. has a capital structure that…

A: Solution:- Cost of equity means the minimum rate of return required by the equity shareholders of a…

Q: Year Investment Cash Inflow $13,000 $10,000 $1,000 $2,000 $2,500 $4,000 $5,000 $4,000 $5,000 $4,000…

A: Payback period = initiative investment/Annual cash inflows Here cash inflows per year is not…

Q: Mr. Dalisay applied for a bank loan with a principal of P150,000 to be paid after five years in…

A: Loan amount = P150,000 Interest rate on loan = 0.06 Annual interest amount = P9,000 (i.e. P150,000 *…

Q: Austin is going on holiday with his infant daughter and has a first class air ticket. He values…

A: A negotiation is a proactive dialogue that addresses a problem in a way that is agreeable to both…

Q: Problem 8) For the cash flow diagram given below, compute the rate of return. $300 $250 $250 $200…

A: Rate of return is where present value of cashinflows equals to initial investment.

Q: Which formula provides the value of this gift

A: Gift of $5,000 is to be received 6 years from today  Formula for calculating Present value  PV =…

Q: 25) The current exchange rate between the Japanese yen and the U.S. dollar is ¥100 per dollar. If…

A: Depreciation of a currency implies that the currency has become cheaper. Thus, a lesser amount of…

Q: . A bank offers a 272 – day discounted loan at a simple discount rate of 12%. (a) How much money…

A: a) Discounted loan is a loan which doesn't have to pay interest periodically. This type of loan…

Q: National Co.’s stock sells for P35 that recently paid a P5 dividend. The growth rate will remain the…

A: As per formula Cost of newly issued equity = [D0*(1+g)/(P0-F)]+g Where D0 - Recent dividend i.e. P5…

Q: Which is a key difference a manager should note in choosing between forward and futures contracts?…

A: a. Exchange trading occurs in the case of futures contracts. Therefore, futures contract are more…

Q: n March 2022, ABC Co. is considering the issuance of $100 million 10-year bonds rated AAA. The issue…

A: Rates of AAA bonds are related directly to the treasury bond future contracts so can use for hedging…

Q: What is the annualized investment rate% on a Treasury bill that you purchase for $8000 that will…

A: T-bills refers to a debt securities or government bonds issued by the central bank on behalf of the…

Q: How much should she invest at the end of every year in an investment fund that earns 9% annually to…

A: Time value of money (TVM) refers to the method used to measure the amount of money at different…

Q: Larry wants to make a decision on a six- year amortized loan for him to buy a new car. The value of…

A: Maximum amount of loan that Larry can pay in 6 years will be equal to the the present value of…

Q: escribe the role of a financial risk manager, how one would differentiate between pure and…

A: Financial risk management: It is a process of identifying potential  risk of a company  with respect…

Q: Kristine bought a smartphone worth Php72,000 and made a downpayment of Php15,000. The remaining…

A: Present Value of Ordinary Annuity refers to the concept which dictates the discounted value of a sum…

Q: A 11-year, semiannual coupon bond sells for $938.52. The bond has a par value of $1,000 and a yield…

A: Price of the bond (P0) = $938.52 Maturity value of the bond (Z) = $1000 Semiannual yield to maturity…

Q: Question 2 The Penny Wheel Company is considering the following two projects, but the firm can only…

A: The question is related to Capital Budgeting. 1. The Payback period is the length of time required…

Classification Of Risk

Risk means when there could be a possibility that the returns expected from a particular project or investment may or may not match the investor's expectations. In other words, the uncertainty of an income arising from a source that would either be lower than expected or result in losses in risk exposure of the project. The higher the risk involved, the higher is the return expected by the investor as the investor is exposed to a high level of risk. There are various methods by which different types of risk can be assessed and avoided or mitigated.