The Security Risk Evaluation book published by Merrill Lynch relies on the __________ most recent monthly observations to calculate regression parameters. A 12 B 36 C 60 D 120 E none of the above Answer: C Difficulty: Easy Rationale: Most published betas and other regression parameters including those published by Merrill Lynch are based on five years of monthly return data. 5. The Security Risk Evaluation book published by Merrill Lynch uses the __________ as a proxy for the market portfolio. A Dow
Premium Investment Variance Regression analysis
still contained in commercial grade lindane used as insecticide. Lindane‚ however‚ has not been produced or used in the United States for more than 20 years. At ambient temperatures it is a stable‚ white‚ powdery solid substance. • β-HCH ‚ or β-BCH‚ beta-Hexachlorocyclohexane β-hexachlorocyclohexane (β-HCH) is an organochloride which is one of the isomers of hexachlorocyclohexane (HCH). It is a byproduct of the production of the insecticide lindane (γ-HCH). It is typically constitutes 5-14% of
Premium Insecticide Pesticide DDT
Cost of Capital at Ameritrade What factors should Ameritrade management consider when evaluating the proposed advertising program and technology upgrades? Why? Mr. Ricketts believes that his role as CEO is to maximize shareholder value by accepting any project whose expected return on investment is greater than the cost of capital. Therefore‚ the main factors that Ameritrade management should consider are the expected return on investment for the project‚ and how this compares to the project’s
Premium Investment Rate of return Finance
asset beta for the Collinsville investment? Using the betas‚ determine the appropriate discount rate for the investment. Evaluate the investment. We are interested in obtaining the asset beta for the Collinsville investment. We can estimate asset betas by 1) looking it up in Bloomberg‚ 2) finding “identical twins” and comparing their betas‚ and 3) un-levering the beta from the company itself. Here‚ using 2 and 3 we are interested in both the asset beta of Dixon as well as the asset betas of companies
Premium Investment Capital expenditure Net present value
References: Bowman‚ R. G.‚ and Bush‚ S. R.‚ 2006‚ Using Comparable Companies to Estimate the Betas of Private Companies‚ Journal of Applied Finance 16(2)‚ 71-81. Brealey‚ R. A.‚ Myers‚ S. C and Allen‚ F. 2011‚ Principles of Corporate Finance‚ 10th Ed.‚ McGraw Hill Irwin‚ New York. Brigham‚ E and Ehrhardt‚ M‚ 1998‚ Financial management: Theory and
Premium Net present value Internal rate of return
which of the two projects are financially more pleasing we need to use calculations to determine the value of the beta‚ WACC‚ NPV and IRR. Fist we want to calculate the net working capital (NWC). The NWC turnover ratio for this new operation was expected to be 6:1.( NWC turnover = Sales/ NWC = 6/ 1 = 3‚500‚000 / NWC. Thus‚ NWC = $ 583‚333.33); then we find the project outboard’s beta is 1.377. For the outboard motors project we are
Premium Weighted average cost of capital Net present value
Running head: PRICING MODELS Pricing Models Adam F. Thornton FIN 501 – 3 TUI University Dr. William Anderson Chipotle Mexican Grill (CMG) is one of the fastest growing restaurant chains in the United States. Self proclaimed as “fast-casual‚” CMG offers a dining experience that is unique‚ organic‚ and which draws from the local economy. For the investor‚ CMG is a wise investment for the aggressive and fast growing portion of a portfolio. When determining an appropriate
Premium
8 – 23 MERRILL FINCH INC. RISK AND RETURN a. (1) Why is T-bill’s return independent of the state of the economy? Do T-bill’s promise a completely risk-free return? Explain (2) Why are High Tech’s returns expected to move with the economy‚ whereas‚ Collections’ are expected to move counter to the economy? 1. The 5.5% T-bill return does not depend on the state of the economy because the Treasury must redeem the bills at par regardless of the state of the economy; therefore‚ T-bills are
Premium Standard deviation Arithmetic mean Risk aversion
Introduction Kimi Ford is a portfolio manager at NorthPoint Group‚ a mutual-fund management firm. She is evaluating Nike‚ Inc. (“Nike”) to potentially buy shares of their stock for the fund she manages‚ the NorthPoint Large-Cap Fund. This fund mostly invests in Fortune 500 companies‚ with an emphasis on value investing. This Fund has performed well over the last 18 months despite the decline in the stock market. Ford has done a significant amount of research through analysts’ reports
Premium Management Learning German language
in the blanks later.) Returns on Alternative Investments Estimated Rate of Return State of the Economy Prob. Recession Below Avg. Average Above Avg. Boom 0.1 0.2 0.4 0.2 0.1 r r-hat ( ˆ ) Std. dev. () Coeff. of Var. (CV) beta (b) T-Bills 5.5% 5.5 5.5 5.5 5.5 High Tech -27.0% -7.0 15.0 30.0 45.0 Collections 27.0% 13.0 0.0 -11.0 -21.0 1.0% 0.0 13.2 13.2 -0.87 U.S. Rubber 6.0%a -14.0 3.0 41.0 26.0 9.8% 18.8 1.9 0.88 Market
Premium Investment Rate of return Standard deviation