International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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Assume the following information: Predicted Value of Realized Value of Period New Zealand Dollar New Zealand Dollar 1 $.52 $.50 2 .54 .60 3 .44 .40 4 .51 .50 Given this information, What is absolute forecast error as a percentage of the the second period? a. 6.5% b. 6% c. 26% d. 10% e. 1.5%
Based on the following information, what is the standard deviation of returns?
State of Economy
Probability of Stateof Economy
Rate of Return ifState Occurs
Recession
.28
−
.096
Normal
.41
.111
Boom
.31
.221
Historical rate of returns: years, return: 1, 7% 2,14% 3,26% 4,-11%
What is the standard deviation?
If real rate interest is 3.1% and expected inflation is 7.3% then exact nominal rate of return is?
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Use the following output from a market model regression of the weekly percentage returns on the AIG commodities index on a market index to answer questions a. - f.
a. What is the formula for the Commodities Index' characteristic line?
b. You forecast a market return of 1.0% for next week. What is next week's expected return for the commodities index?
c. What is the correlation between the return on the commodities index and the return on the market Index?
d. How much of the variation in the commodities index's returns are explained by the model?
e. Based on these regression results, the commodities index would be considered what kind of an investment?
f. Does this regression have much explanatory power? Why or why not?
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Use the following information on states of the economy and stock returns to calculate the standard deviation of returns. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
State of Economy
Probability ofState of Economy
Security Returnif State Occurs
Recession
0.40
−4.50
%
Normal
0.50
13.00
Boom
0.10
25.00
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what has been the standard deviation of annual returns (volatility) of these markets?
Year
Emerging
1988
40.4%
1989
65.0%
1990
-10.6%
1991
59.9%
1992
11.4%
1993
74.8%
1994
-7.3%
1995
-5.2%
1996
6.0%
1997
-11.6%
1998
-25.3%
1999
66.4%
2000
-30.6%
2001
-2.4%
2002
-6.0%
2003
56.3%
2004
26.0%
2005
34.5%
2006
32.6%
2007
39.8%
2008
-53.2%
2009
79.0%
2010
19.2%
2011
-18.2%
2012
18.6%
2013
-2.3%
the standard deviation of annual returns (volatility) of these markets?
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