you have two investmwnts, each of which has a 0.8% chance if a loss $12 million and a 99.2% chance of loss of $2 million. these two incestments ate independent of each other. what is 99% vaR for a portfolio consisting of these two investments
Q: The value of $60 deposited in a bank for six years at a rate of 10% compounded annually is: O $106.2...
A: Deposit amount (PV) = $60 Interest rate (r) = 10% Period (n) = 6 Years
Q: Briefiy explain (in one or two sentences) what the meaning is of the calculated AS/SFR ask
A: Step 1: A cross exchange rate is the rate of exchange between two currencies that are inferred by th...
Q: One-year T-bills yield 1.00%. Based on future rates, the market expects that one year from now, new ...
A: Pure Expectations Theory (PET) is used to compute the future rates because this theory defines that ...
Q: Elgin Battery Manufacturers had sales of $1,000,000 in 2015 and their cost of goods sold is $700,000...
A: Income taxes is the amount of taxes and obligations which needs to be paid by the individual or busi...
Q: You bought a car and borrowed $25,067 for 48 months. If the rate is 3.56%, what is your monthly paym...
A: Loan amount (L) = $25067 n = 48 months r = 3.56% per annum = 0.29667% per month X = Monthly payment
Q: A decrease in the will cause an increase in common stock value. O A. growth rate O B. required rate ...
A: Value of the common stock depends upon following parameters: a) Last dividend b) Growth rate c) Requ...
Q: The number of compounding periods is equal to: O Number of years x rate O Number of years number of ...
A: Under compounding methods, interest is computed and charged on principal and interest both amounts. ...
Q: Suppose the stock price is $83 and the continuously compounded annual interest rate is 7%. If the 6-...
A: Stock price or spot rate is $83 6 month forward price is $85 To Find: Forward premium
Q: A solar lighting system is to be purchased and installed for 310,000. This system will save approxim...
A: The present worth of a project is the net value added by undertaking a certain project. This is comp...
Q: Bob has $2,500 invested in a bank that pays 1% annually. How long will it take for his funds to doub...
A: Given, 2500 invested now Amount doubled = 2500 + 2500 = 5000 So, Maturity Value = 5000
Q: Which of the following is an example of long term instruments? (select all that apply) a. Asset back...
A: Long Term Instruments are the instruments which are issues for the longer time period, generally mor...
Q: An asphalt road requires no upkeep until the end of 2 years when P60,000 will be needed for repairs....
A: As you have asked multiple questions, we will solve the first question as per the policy presented b...
Q: 7. Rodrick invested 2M to an account that earns 8.3% compounded continuously. Determine the amount o...
A: Investment (PV) = 2,000,000 Interest rate (r) = 8.3% Period (t) = 17 years Mathematics constant (e) ...
Q: What are the portfolio weights for a portfolio that has 110 shares of Stock that sell for $79 per sh...
A: Number of shares of stock A = 110 Shares Price per share stock A = $79 Number of shares of stock B =...
Q: When the annual cash flows are unequal, the payback period is computed by adding the annual cash flo...
A: Year Annual cf Cumulative cf 1 20000 20000 2 30000 50000 3 40000 90000 4 50000 140000 5 60...
Q: If you deposit BD1,500 now, BD3,600 three years, BD2000 seven years, and BD1,800 nine years from now...
A: Deposit now = 1500 Deposit in three years = 3600 Deposit in seven years = 2000 Deposit in nine years...
Q: ou are deciding between two mutually exclusive investment opportunities. Both require the same initi...
A: IRR is the discount rate that causes NPV = 0. NPV is the net of the present value of cash outflows a...
Q: If the expected inflation rate is 3.45%, the realized real rate of return is 3.80%, and the actual i...
A: Expected Inflation Rate is 3.45% Realized Real Rate of Return is 3.80% Actual Inflation Rate is 2.15...
Q: The formula below tells us how to obtain the maturity value on a simple discount loan if we are give...
A: Simple discount rate = 7.56% How many years for debt to double? Assuming Debt = 100 Future Value = 2...
Q: 14.) The Virginia Corporation recently issued 10-year bonds at a price of $1,000. These bonds pay $6...
A: The current price of a projected amount of money or series of payments with a predetermined rate of ...
Q: The Paulson Company's year-end balance sheet is shown below. Its cost of common equity is 16%, its b...
A: Data given: Cost of equity(Ke) = 16% Before-tax cost of debt (Kd) = 8% Tax rate (T) = 25% Total debt...
Q: O a. International banks serve retail cients, corporations or individuals with forex transactions. O...
A: International banks provide the major platform of the Foreign exchange market. It provides a platfor...
Q: What is Bond A's interest rate?
A: Real Risk-Free Rate: It is the rate of return expected from a risk-less investment. It is computed b...
Q: Answer all parts
A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question s...
Q: It is now January 1. You plan to make a total of 5 deposits of $600 each, one every 6 months, with t...
A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question s...
Q: Independent Activity 2 Starting on her 30th birthday, a woman will invest an amount every year shoul...
A: Investment each year on birthday Beginning of period investments Annual rate = 7% Future Value Requi...
Q: 1. Maria takes out a 30-year fixed rate mortgage at 5% to buy a house that costs $450,000. To avoid ...
A: Given: Particulars 30 years 15 years Years 30 15 Mortgage rate 5% 4.50% Down payment 20% 20...
Q: What is the equivalent annual cost in years 1 through 9 of a contract that has a first cost of $72,0...
A: Annual Equivalent Cost (EAC) means the same amount per year whose PV will be equal to the PV of the ...
Q: An all equity corporation has net income of $63,313and a required rate of return of 0.14%. What woul...
A: Given: Net income = 63313 Require rate of return = 0.14%
Q: Assume that in 2018, the first edition of a comic book was sold at auction for $597,20o. The comic b...
A: Price in 1935 (P0) = $0.05 Price in 2018 (Pn) = $597,200 Period form 1935 to 2018 (n) = 83 Years
Q: 1) Law of one price implies the price of the coupon bond to be $1186, suggesting no arbitrage opport...
A: The law of one price states that a particular commodity or asset has the same price globally.
Q: If the stock market is at least semistrong efficient then, O A. trading on information that you read...
A: Semi strong form of efficiency in a market says that investors and traders in the stock market will ...
Q: on gives the right to sell an asset at any time prior to or at maturity? * A. European Put B. Americ...
A: Options gives the opportunity Buy or sell the stock on or before maturity of stock. But there is obl...
Q: Using Problem 1, if Hogwarts Corp.’s policy is to employ Aggressive financing policy, which of the f...
A: "Hi, Thanks for the Question. Since you asked multiple question, we will provide the answer of first...
Q: Consider the following information: State of Economy State of Economy if State Occurs Recession Boom...
A: Expected return =Summation of Probability of state of economy×Rate of return if state occurs
Q: CSR342 2022 SP Week 6 Assignment Assignment 1. A. John will purchase Equinox EV ($35,000). John's cr...
A: Loan is a value which is borrowed from the external sources like banks for a certain period and this...
Q: Horizon Communications stock pays a fixed annual dividend of $3.00. Because of lower inflation, the ...
A: Given Information : Fixed Annual Dividend = $3 Original yield on preferred stock = 12% New Yield on...
Q: Which option gives the right to buy an asset any time prior or to maturity? * A. European Call B. Am...
A: An option is a financial derivative instrument that derives its value from an underlying. The option...
Q: An investment that will give you monthly payments for 14 years costs $146,897. If your required retu...
A: An annuity is a series of cash flows that involve equivalent periodic amounts at equal time interval...
Q: What equal annual payment must be deposited into a sinking fund to accu- mulate $60,000 in 20 years ...
A: Sinking Funds refers to an arrangement of annuity for a definite time period for the accumulation of...
Q: Which of the following is NOT among key trends affecting the banking industry? O Convergence O ESG f...
A: The banking business consists of a network of financial entities known as banks that assist consumer...
Q: Financial markets promote economic efficiency by * A.channeling funds from investors to savers. B. c...
A: Answer - The financial system performs the essential economic function of channeling the funds o...
Q: 1. Identify the concept of an optimal capital structure for a business firm. 2.Analyse TWO (2) iss...
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any ...
Q: t the end of the year? 1. 1099 B. Schedule C C. 1040 D. W2
A: There are income from savings that you must show in the income tax return form and for that separate...
Q: Candy Company had sales of $320,000 and cost of goods sold of $112,000. What is the gross profit mar...
A: Sales = $320,000 COGS = $112,000 Gross profit = Sales-COGS = 320,000-112000 ...
Q: not use of the excel Q)You plan to purchase a new TIG welder for your company. It will cost $2,800 ...
A: Cost now = 2800 Cost at end of 3rd year = 60 Cost at end of 4th year = 130 Sale value at end of 5th ...
Q: Albert Ang invested ₱88,000 at ABC Credit Union at 12% interest compounded quarterly. What is the e...
A: The effective rate of investment is calculated as the Effective Annual Rate(EAR).
Q: You want to buy a house and received the following loan quotes. What is the incremental cost of Loan...
A: The incremental borrowing cost represents the effective interest cost that will be paid on additiona...
Q: 5 factors contributing to the financial Crisis and why each helped to bring on the crisis.
A: Financial crisis is a situation which leads to the decline in the asset , businesses , consumers, an...
Q: The future value of an investment is Php5,500,000 while its present value is Php3,500,000. It has a ...
A: Present value(PV) is Php3,500,000 Future value(FV) is 3,500,000 Time Period is 13 years Compounding ...
suppose that you have two investmwnts, each of which has a 0.8% chance if a loss $12 million and a 99.2% chance of loss of $2 million. these two incestments ate independent of each other. what is 99% vaR for a portfolio consisting of these two investments ?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
- Suppose that each of two investments has a 4% chance of a loss of $10 million, a 2% chance of a loss of $1 million, and a 94% chance of a profit of $1 million. They are independent of each other. What is the VaR for a portfolio consisting of the two investments when the confidence level is 95%? Also calculate the expected shortfall. (show steps)Suppose there are two investments A and B. Either investment A or B has a 4.5% chance of a loss of $15 million, a 2% chance of a loss of $2 million, and a 93.5% change of a profit of $2 million. The outcomes of these two investments are independent of each other. (a) What is the 95% VaR of investment A? How about investment B? (b) What is the 95% for a portfolio consisting of both investments A and B?(Hint: write out the probabilities of all possible portfolio outcomes.) (c) Is the summation of the 95% VaRs of the individual investments greater or smaller than the 95% VaR of the portfolio? If we measure the risk of an investment or portfolio using VaR, does this suggest that diversificationmust decrease risk? (Intuitively, putting A and B in a portfolio is a form of diversification.)An investor invests 75% of his wealth in a risky asset with an expected rate of return of 28% and a standard deviation of 30% and 25% in a treasury bill that pays 3%. What is the EXPECTED RETURN of the combined portfolio of t-bills and the risky asset?
- Suppose you are considering investing your entire portfolio in three assets A, B and C. You expect that after you invest, four possible mutually exclusive scenarios will occur, with associated returns (in %) for each of the three assets as listed below. The probability of each scenario is given below. A B C Probabilities return 0.05 0.50% -3.60% 3.60% 0.35 0.60% 2.75% 0.15% 0.45 3.66% 1.45% 0.45% 0.15 -4.80% -0.60% 6.30% Find the expected returns and standard deviations of Asset A, B & C. (HINT: the expected return is given by the probability-weighted sum of returns in each scenario. The expected standard deviation is given by the square root of the probability-weighted sum of squared deviations from the expected return.) Is there any reason to invest in Asset A given its low expected return and high standard deviation?Jamie has wealth of $10,000 to invest. The market portfolio consists of three stocks with 20% being Stock A, 40% being Stock B and the remainder Stock C. The expected return on this market portfolio is 14%. The risk free rate is 5%. The CAPM holds. Suppose Jamie's optimal portfolio has an expected return of 23%, what are the dollar values of her investments in A, B. C and the risk free asset?An investor has an opportunity to invest in two risky assets and a risk-free asset. Theexpected return of the two risky assets are μ1 = 0.12, μ2 = 0.15. Their standarddeviations are σ1 = 0.05 and σ2 = 0.1, and the correlation coefficient between theirreturn is 0.2. The risk-free rate is 0.05. Suppose the investor has $1000 and he wantsto hold a portfolio with expected return of 0.1. If the investor is risk averse, how muchshould he invest in the two risky assets and the risk-free asset?
- Ms. B has $1000 to invest. She is considering investing in the common stock of company M. In addition, Ms. B will either borrow or lend at the risk-free rate. Ms. B decide to invest $350 in common stock of company M and $650 placed in the risk- free asset. The relevant parameters are 1) What is the expected return? 2) What is the variance of the portfolio? 3) What is the standard deviation of the portfolio?One of our clients, Mr. Choi, currently has an investment portfolio value of $1mil. His portfolio consists of 70% risky portfolio and 30% risk-free asset. If Mr. Choi has now extra $100,000 cash to invest, and if he is a constant relative risk aversion, how do you think he wants to allocate his extra $100,000 over the risky and the risk-free asset? Assume that Mr. Choi’s utility is a power function with gamma= 2 If another client, Mr. Smith, also has a power utility function but has a larger risk preference parameter value of gamma than Mr. Choi does, how does Mr. Smith want his money to be allocated relative to Mr. Choi?An investor invests 30 percent of his wealth in a risky asset with an expected rate of return of 0.14 and a standard deviation of .35 and 70 percent in a T-bill that pays 3 percent. His portfolio's expected return and standard deviation are __________ and __________, respectively. Please show the formula
- You have invested $1,000 in a risky asset with an expected rate of return of 0.17 and a standard deviation of 0.40 and a T-bill with a rate of return of 0.04. What percentages of your money must be invested in the risky asset and the risk-free asset, respectively, to form a portfolio with an expected return of 0.11? What percentages of your money must be invested in the risk-free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 0.20? Calculate the slope of CAL. If the degree of risk aversion A=4, what proportion of the money should be invested in risky asset. Sub Parts to be solvedYou have invested $1,000 in a risky asset with an expected rate of return of 0.17 and a standard deviation of 0.40 and a T-bill with a rate of return of 0.04. What percentages of your money must be invested in the risky asset and the risk-free asset, respectively, to form a portfolio with an expected return of 0.11? What percentages of your money must be invested in the risk-free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 0.20? Calculate the slope of CAL. If the degree of risk aversion A=4, what proportion of the money should be invested in risky asset.Consider three investments. You are given thefollowing means, standard deviations, and correlations for the annual return on these three investments.The means are 0.12, 0.15, and 0.20. The standarddeviations are 0.20, 0.30, and 0.40. The correlationbetween stocks 1 and 2 is 0.65, between stocks 1 and3 is 0.75, and between stocks 2 and 3 is 0.41. Youhave $10,000 to invest and can invest no more thanhalf of your money in any single stock. Determine theminimum-variance portfolio that yields a mean annualreturn of at least 0.14