‘Alex Sharpe’s Portfolio’ 1. Estimate and compare the returns and variability (i.e. annual standard deviation over the past five years) of Reynolds and Hasbro with that of the S&P 500 index. Which stock appears to be riskiest? Parameters S&P 500 Reynolds (RJR) Hasbro (HAS) Average returns 0.57% 1.87% 1.18% Variance 0.001 0.009 0.007 standard deviation(Risk) 0.036 0.094 0.081 From the table we can say that investing in Reynolds stock is risky. 2. Suppose Sharpe’s position had been 99 percent of
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Jedediah Smith was a clerk‚ frontiersman‚ hunter‚ trapper‚ author‚ cartographer‚ and explorer of the Rocky Mountains‚ the North American West and the Southwest during the early 19th century. After 75 years of obscurity‚ following his death‚ Smith was rediscovered‚ as the American whose explorations led to the use of the 20-mile (32 km)-wide South Pass‚ as the dominant point of crossing the Continental Divide‚ for pioneers on the Oregon Trail. Coming from a modest family background‚ Smith traveled
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directors is responsible for managing day‑to‑day operations and carrying out the policies established by the chief executive officer. FALSE Chapter 4 8. Since individuals are always confronted with opportunities to earn positive rates of return on their funds‚ the timing of cash flows does not have any significant economic consequences. FALSE 9. Time‑value of money is based on the belief that a dollar that will be received at some future date is worth more than a dollar today
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FINANCE Question: 1. (a) Frodo Baggins has RM1‚500 to invest. His investment counselor suggests an investment that pays no stated interest but will return RM2‚000 at the end of 3 years. (i) (ii) What annual rate of return will Frodo earn with this investment? Frodo is considering another investment‚ of equal risk‚ that earns an annual return of 8%. Which investment should he make and why? (b) Samwise Gamgee was seriously injured in an industrial accident. He sued the responsible parties
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Examination Paper Sample Exam 1 Guide Answers 4190 BUSINESS FINANCE II CORPFIN 2006 PLEASE SEE NEXT PAGE (CORPFIN 2006) SECTION A: Multiple Choice Page 2 of EIGHT Pages (Each question is worth 1 mark- select the answer you believe most correct. Answer these questions in the exam booklet‚ not on this paper) A.1 Which of the following statements with regards to mortgage loans is false? (a) (b) (c) (d) Mortgage loans are usually made on a credit foncier basis. A ‘balloon’ payment
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projects. The required rate of return is 14.6 percent for project A and 13.8 percent for project B. Which project should you accept and why? project A; because it has the higher required rate of return project A; because its NPV is about $4‚900 more than the NPV of project B X project B; because it has the largest total cash inflow project B; because it has the largest cash inflow in year one project B; because it has the lower required return 2. A project has average net
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any of the values 1-12 the bet is won and the return is $3.00. If the ball lands on any of the other values the bet is lost. a.) Compute the expected value of this game. (4 points) X 2 -1 P(x) 12/38 26/38 X*P(x) .631 -.684 -.053 The expected value is -.053. b.) Interpret this expected value. (4 points) This means that the casino wins 5.3 cents per game or the players lose 5.3 cents per game. c.) What is the average return to the casino from 1‚000‚000 such bets? (4 points)
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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 cost of capital. Other factors that should also be considered include: how market swings will affect the expected return on investment‚ the project’s payback period (the project will require massive
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of an annuity due? Illustrate Ans. Money has time value: e.g. Rs 1‚000 received today is not the same after year Present value of cash flow: It shows the value of expected amount at current value. Discount rate = Inflation rate + required rate of return + risk free premium rate Details required
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percent coupon rate when the market’s rate of return is 9 percent? Answer: More than its face value. 2. If an investor may have to sell a bond prior to maturity and interest rates have risen since the bond was purchased‚ the investor is exposed to __________. Answer: interest rate risk 3. Beta Budget Brooms will pay a big $2 dividend next year on its common stock‚ which is currently selling at $50 per share. What is the market’s required return on this investment if the dividend is expected
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