Chapter 15, Problem 2IEE

Explain how a financial market operates? Which of the investment constraints is expected to have the most impact on your decision process? You plan to buy common stock and hold it for one year. You expect to receive both ₱150 and ₱260 from the sale of the stock at the end of the year. How much will you pay for the stock, if you want to a. Have a return of 8% b. A return of 20% c. A return of 15%

The stock market data is given in the following table. The above table provides the correlations among Telmex, a telephone or communication company located in Mexico, the Mexico stock market index, and the world market index, together with the standard deviations (SD) of returns and the expected returns ( /bar (R) ). The risk-free rate is 8%. Required: Suppose now that Telmex has made its shares tradable internationally via cross-listing on NYSE. Again using the CAPM paradigm, estimate Telmex's equity cost of capital. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

A global equity manager is assigned to select stocks from a universe of large stocks throughout the world. The manager will be evaluated by comparing her returns to the return on the MSCI World Market Portfolio, but she is free to hold stocks from various countries in whatever proportions she finds desirable. Results for a given month are contained in the following table:   Country Weight InMSCI Index Manager’sWeight Manager’s Returnin Country     Return of Stock Indexfor That Country   U.K. 0.23 0.46 21 %   13 % Japan 0.36 0.18 14     14   U.S. 0.37 0.28 10     12   Germany 0.04 0.08 6     13                     a. Calculate the total value added of all the manager’s decisions this period. (Do not round intermediate calculations. Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign.)   b. Calculate the value added (or subtracted) by her country allocation decisions. (Do not round intermediate calculations. Round your answer to 2…