Which of he following best describes our use of HPR in our stock
valuation?
A. HPR is the fair return on the stock
B. HPR is our best guess of the market's required return on the
stock given its current price.
C. HPR is the guaranteed return on the stock.
D. HPR is the historical return on the stock
A stock's one year target price estimate comes from:
It is the average of the analyst estimates
The CEO of the...
The current annualized yield on a 1-year STRIPS is 2.4% and the
annualized yield on a 2-year STRIPS is 2.6%. According
to the expectations theory of interest rates, what will be the
annualized yield on a 1-year STRIPS one year from now? What would
you expect to pay for this STRIPS with a $1,000 face value?
State of the Economy
Probability
HPR (Fund A)
HPR (Fund B)
Boom
.50
7%
25%
Normal growth
.3
-5%
10%
Recession
.2
20%
-25%
1. What are the expected holding period returns for
Fund A and Fund B?
2. What are the expected standard deviations for Fund A and Fund
B?
3. What are the covariance and correlation coefficient between
the returns of Fund A and Fund B?
4. Now using Fund A and Fund B to construct our optimal...
4) The current annualized yield on a 2-year STRIPS is
0.13% and the annualized yield on a 3-year STRIPS is 0.15% (WSJ for
week ended 7/31/2020). According to the expectations theory of
interest rates, what will be the annualized yield on a 1-year
STRIPS two years from now? What would you expect to pay for this
STRIPS with a $1,000 face value two year from now?
note: no excel or calculator. using formula
only
5. Suppose you have a 3.25%...
The annualized risk-free rate in the eurozone is 3% and the
annualized UK risk-free rate is 5%. The spot quote is €1.20/£ while
the one year forward quote is €1.25/£. You can borrow either
€1,000,000 or £833,333.33. According to interest rate parity, is
the forward quote correct? If not, what should it be? If the
forward quote is not correct, how much money would you profit if
you implemented the proper arbitrage?
Multiple Choice:
Forward rate should be €1.2643/£; arbitrage...
the annualized risk-free rate in the eurozone is 5% and the
annualized UK risk-free rate is 3%. The spot quote is €1.18/£ while
the one year forward quote is €1.25/£. You can borrow either
€1,000,000 or £847,457.6.
According to interest rate parity, is the forward quote correct?
If not, what should it be?
If the forward quote is not correct, how much money would you
profit if you implemented the proper arbitrage?
Multiple Choice
Forward rate should be €1.2643/£; arbitrage...
How does the annualized return you found in the previous two
questions compares with the promised yield to maturity of the
bond?
Group of answer choices:
a. The annualized return of the doing the sale at 18 months is
higher than the YTM which itself is higher than the return of doing
the sale after six months
b. The realized returns from doing the sales are lower than the
YTM
c. The realized returns from doing the sales are higher...
You are given the following data
Year
HPR of Stock A HPR of Stock B
HPR of Stock C
2017
12%
16%
12%
2018
14%
14%
14%
2019
16%
12%
16%
(1) Calculate expected rate of return for each stock
(2) Calculate standard deviation for each stock
(3) Calculate coefficient of variation for each stock. If you
will choose only one stock for investment, which stock will you
choose? Why?
(4) How much is correlation coefficient...
1) What does the subscript "t" as in Pt mean in the HPR formula?
a. It means ton of money. b. It means total. c. It's a time-marker.
d. It's a tax marker.
2)
So, which of the following does P2007 not mean?
a.
Average Price during 2007
b.
Price at the close of market in 2007
c.
Price as of the end of trading in 2007
d.
Price at the end of 2007
3) If t = 2010 and...