PORTFOLIO MANAGEMENT THE MODEL’S ASSUMPTIONS [ARE THEY REALISTIC?] ESTIMATING THE MODEL PARAMETERS RELIABILITY OF THE ESTIMATES IMPROVING THE MODEL SHARPE VERSUS NAÏVE DIVERSIFICATION [BODIE Appendix 6A +] REFERENCE: BODIE 6th ed.‚ CHAPTER 9‚ SECTIONS 9.1-9.5 AN APPLICATION OF THE SHARPE SINGLE INDEX MODEL A Disciplined Stock Selection Strategy REQUIRED READING 1 FARRELL Chapter 6‚ or "A Disciplined Stock Selection Strategy"‚ Interfaces‚ October 1982‚ pp. 3-12*. OBJECTIVES;
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Question 1 Consider an option on a non-dividend-paying stock when the stock price is $30‚ the exercise price is $29‚ the risk-free interest rate is 5% per annum‚ the volatility is 25% per annum‚ and the time to maturity is four months. a. What is the price of the option if it is a European call? b. What is the price of the option if it is an American call? c. What is the price of the option if it is a European put? d. Verify that put–call parity holds. Question 2 Assume
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30%. What is the return on assets of Google‚ Inc.(No more than two decimals in the percentage interest rate‚ but do not enter the % sign.) Answer for Question 3 Question 4 (10 points) Suppose CAPM holds‚ and the beta of the equity of your company is 2.00. The expected market risk premium (the difference between the expected market return and the risk-free rate) is 4.5% and the risk-free rate is 3.00%. Suppose the debt-to-equity ratio of your company is 20% and the market believes that the beta
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Food Costing Solved problems 1. A restaurant requires a following profits on the selling prices of various items or dishes:- a. Paulet Saute Maringo 60% b. Chicken a la kieve 45% c. Coffee 80% You are required to:- a) Find out the selling price of the above items/ dishes if the cost were:- a. Paulet sauté maringo Rs 50 b. Chicken a la kieve Rs 70 c. Coffee
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Interest Rate Risk Supporting Document to the New Basel Capital Accord Issued for comment by 31 May 2001 January 2001 Superseded document Superseded document Table of contents SUMMARY .............................................................................................................................................. 1 I. SOURCES AND EFFECTS OF INTEREST RATE RISK ............................................................. 5 A. SOURCES OF INTEREST RATE RISK .......
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Interest Rate Risk (IRR) Management What is Interest Rate Risk : Interest rate risk is the risk where changes in market interest rates might adversely affect a bank’s financial condition. The management of Interest Rate Risk should be one of the critical components of market risk management in banks. The regulatory restrictions in the past had greatly reduced many of the risks in the banking system. Deregulation of interest rates has‚ however‚ exposed them to the adverse impacts of interest rate risk
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N of RISK-ADJUSTED DISCOUNT RATES and LIABILITY BETA RUSSELL E. BINGHAM T H E H A R T F O R D FINANCIAL SERVICES G R O U P Table of Contents Page 2 3 5 7 8 11 12 13 14 14 15 16 17 17 18 Subject Abstract 1. Summary 2. Total Return Model 3. After-Tax Discounting 4. Derivation of Risk-Adjusted Discount Rate and Liability Beta Figure l : Baseline Risk / Return Line vs Leverage 5. Liability Beta Figure 2: Equity vs Liability Beta Figure 3: Equity Beta vs Risk-Adjusted Discount Rate (After-Tax)
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after so many years of “slavery” and isolation. Therefore‚ it is essentially necessary to inquire into history to understand the epigraph itself. “I will call them my people‚ which were not my people; and her beloved‚ which was not beloved.” Romans 9:25 In the biblical history‚ this verse states the rejection of the Jews and the calling of the Gentiles‚ and the apostle Paul is expressing his concern and affection for his people. The Jews were by heritage the people of God chosen by him but the gentiles
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decision-making power‚ and experience higher rates of violence. Political participation is also hindered at the Panchayat (local governing bodies) level and at the state and national levels‚ despite existing reservations for women.2 The impact of the patriarchal structure can be seen in rural and urban India‚ although women’s empowerment in rural India is much less visible than in urban areas. This is of particular concern‚ since much of India is rural despite the high rate of urbanization and expansion of cities
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is not so. (10 points) This strategy does not consider risk. 3. The NuPress Valet Company has an improved version of its hotel stand. The investment cost is expected to be 72 million dollars and will return 13.50 million dollars for 5 years in net cash flows. The ratio of debt to equity is 1 to 1. The cost of equity is 13%‚ the cost of debt is 9%‚ and the tax rate is 34%. What is the NPV of the project? (10 points) WACC = .5*13+.5*9*(1-.34) = 9.47% PMT = 13‚500‚000‚ i=9.47%‚ n=5‚ PV = ?;
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