You observe the E[IBM] = 8%, E[AAPL] = 12%, B(AAPL)=B(IBM)+2/3, Risk-free rate is 4%. What is the expected return on the market portfolio assuming the CAPM is true.
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You observe the E[IBM] = 8%, E[AAPL] = 12%, B(AAPL)=B(IBM)+2/3,
Risk-free rate is 4%. What is the expected return on the market
portfolio assuming the
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- An index is 1,200. The three-month risk-free rate is 3% per annum and the dividend yield over the next three months is 1.2% per annum. The six-month risk-free rate is 3.5% per annum and the dividend yield over the next six months is 1% per annum. Estimate the futures price of the index for three-month and six-month contracts. All interest rates and dividend yields are continuously compounded.If a municipal bond is quoted according to yield-to-call, the calculation must consider which of the following covenants? I. In-whole calls II. Partial calls III. Catastrophe calls I and II I only II and III I, II, and IIIYou plan to invest $3,500 per year for 39 years into an IRA. What will the value of the IRA be after 39 years if the interest rate is 9% per year? Your answer may vary due to rounding. A) $1,081,733 B) $37,539 C) $148,785 D) $1,182,589
- The price of a non-dividend paying stock is currently S = 100. Over the next year, it is expected to go up by 25% or down by 20%. The risk-free interest rate is r = 5% per annum with continuous compounding. How many units of the stock should you include in a portfolio containing a European Put option that gives the right to sell 100 units of the stock at a strike price K = 100 each, for the result of this portfolio to be independent of the price of the stock in 1-year time? Select one. a. 0 b. 22 c. 44 d. 33 e. 11At age 28 you invest P 25,000 into a mutual fund. If the fund averages a 7% annual return, your investment is worth how much at age 60? a. P 1, 266, 221 b. P 1, 448, 661 c. P 217, 882 d. P 190, 306You have just won the lottery. The state offers you an amortized payout of $200,000 at the end of each year for 30 years. The payout is taxable and the tax rate is 60%. You do not expect the government (who pays the payout) to go bankrupt. The risk-free rate is 9% per year and the total expected market return is 17%. What is the value of the lump-sum payment that would cause you to be indifferent between taking the lump-sum or the amortized payout?
- All else being equal, the expected cash flows of companies are considered less valuable when yields are higher. This could threaten many tech stocks because much of their earnings are expected to come further in the future. True or false.A wooden pole- untreated, will last for 10 years under a certain soil condition, costs P1.2M. If a treated pole will have a useful life double that of the untreated pole, what is the maximum justifiable amount that can be paid for the treated pole, if the maximum amount of ROI is 12%. Consider the annual taxes and insurance to be 1% of the first cost,The owners of a small manufacturing concern have hired a vice president to run the company with the expectation that he will buy the company after five years. For the first $150,000 of profit, the vice president's compensation is a flat annual salary of $50,000 plus 90% of company profits. Beyond the first $150,000 in profits, the vice president's compensation is the salary he receives at $150,000 profit plus 10% of company profits in excess of $150,000.How do you plot the annual compensation of the vice president as a function of annual profit?
- EVALUATE THE REQUIRED VALUE BASED ON THE GIVEN STANDARD NOTATION BD20,500 (A/P, 9%, 7) 2. BD590 (F/A, 5%, 10)The owners of a small manufacturing concern have hired a vice president to run the company with the expectation that he will buy the company after five years. Compensation of the new vice president is a flat salary plus 75% of the first $150,000 profit, and then 10% of profit over $150,000. Purchase price for the company is set at 4.5 times earnings (profit), computed as average annual profitability over the next five years. a. Plot the annual compensation of the vice president as a function of annual profit. b. Assume the company will be worth $10 million in five years. Plot the profit of buying the company as a function of annual profit. c. Does this contract align the incentives of the new vice president with the profitability goals of the owners? d. Redesign the contract to better align the incentives of the new vice president with the profitability goals of the owners.Suppose you have a certain amount of cash on hand at the moment and you decide to invest it in a floating-rate financial asset within the next six months. As the estimate of monetary correction for the next six months is 1.0% per month and the application still pays you interest of 0.5% per month, you calculated that at the end of the period you will have $638. What value do you have available today?