You will be paying $12,200 a year in tuition expenses at the end of the next two years. Bonds currently yield 9%.

a. What is the present value and duration of your obligation? (Do not round intermediate calculations. Round "Present value" to 2 decimal places and "Duration" to 4 decimal places.)

b. What is the duration of a zero-coupon bond that would immunize your obligation and its future redemption value? (Do not round intermediate calculations. Round "Duration" to 4 decimal places and "Future redemption value" to 2 decimal places.)

c. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to 10%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation? (Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to 2 decimal places.)

d. What if rates fall to 8%? (Enter your answer as a positive value. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Assuming inflation rates in the U.S. and Switzerland are 5% and 3% respectively. Spot exchange rate of Swiss francs is US$1.05. Purchasing Power Parity (PPP) and international Fisher effect (IFE) are held in this case.

Required:

1. (a) Calculate the expected percentage change of spot exchange rate of Swiss francs.

2. (b) Calculate the U.S. interest rate if interest rate in Switzerland is 3.5%.

3. (c) “If PPP is held, IFE is held too.” Explain whether this statement is correct.

Why might markets not be efficient? (answer based on efficient markets hypothesis)

What are some advantages and disadvantages of top-down versus bottom-up investing styles? Explain with examples.

You have the opportunity to bid on a project that involves manufacturing 110,000 units per year for 4 years. The project will require $698,000 in fixed assets that would be depreciated straight-line to zero over the project's life. These assets have an expected pretax salvage value of $149,000 at the end of the project. The project would require $56,000 of net working capital, all of which is recoverable, along with $312,000 in annual expenses. What is the minimum price per unit you should bid on this project if you require a rate of return of 18 percent and have a tax rate of 34 percent?

required rate of return = 15%

year

using excel, draw npv profile and find "two" IRRs.

There should be two IRRs. If you get two IRRs, the NPV profile graph should look like a parabola curve.

I figured out the first IRR which is 19% (19.45...% to be exact) but I can't seem to get the second one.

A businessman wishes to borrow an amount of $3 million for a term of 5 years. The agreed rate of interest is 5% per annum effective for the first 3 years, and 7% per annum effective thereafter. Repayment on the loan are made annually in arrears.

a) Find the amount of the level annual repayment

b) Draw up the loan schedule for the full five -year period

c) Calculate what percentage of the loan has been repaid by the end of year 3

d) Without doing any further calculation, explain how this percentage figure would alter if the rate of interest had instead being 7% for the first three years and 5% thereafter.

Consider the following information:

a) What is the expected return on an equally weighted portfolio of these three stocks?

b) What is the variance of a portfolio invested 20 percent each in A and B and 60 percent in C?

Winters Corp. is considering a new product that would require an investment of $22 million now, at t = 0. If the new product is well received, then the project would produce after-tax cash flows of $11.0 million at the end of each of the next 3 years (t = 1, 2, 3), but if the market did not like the product, then the cash flows would be only $4 million per year. There is a 50% probability that the market will be good. The firm could delay the project for a year while it conducts a test to determine if demand is likely to be strong or weak, but it would have to incur costs to obtain this timing option. The project's cost and expected annual cash flows would be the same whether the project is delayed or not. The project's WACC is 10.0%. What is the value (in thousands) of the option to delay the project? Do not round intermediate calculations.

a. $1,826 b. $2,191 c. $2,434 d. $2,678 e. $2,556

Imagine that google's stock price will either rise by one-third or fall by 25% over the next six months. Assume the 6 month risk-free interest rate is 1%. Both the stock price and the exercise price are $530.

1. Calculate the value of the 6 month call option using the replicating portfolio method.

2. Calculate the value of the 6 month call option using the risk-neutral method.

Part a. A firm has $100 million in current liabilities, $200 million in long-term debt, $300 million in stockholders equity, and total assets of $600 million. Calculate the firm's ratio of long-term debt to long-term debt plus equity.

Part b. What is the likely impact on a typical individual investor if a firm undertakes a stock repurchase in lieu of a cash dividend?

Given the following, how to calculate the total accumulated return time t = 0 on a share, brought to time t = -3,4 i.e. incl. reinvestment in new shares from possible dividends?

Junior Sayou, a financial analyst for Chargers Products, a manufacturer of stadium benches, must evaluate the risk and return of two assets, X and Y. The firm is considering adding these assets to its diversified asset portfolio. To assess the return and risk of each asset, Junior gathered data on the annual cash flow and beginning-and end-of-year values of each asset over the immediately preceding 10 years, 2006-2015. These data are summarized in the attached table. Junior’s investigation suggests that both assets, on average, will tend to perform in the future just as they have during the past 10 years. He, therefore, believes that the expected annual return can be estimated by finding the average annual return for each asset over the past 10 years. Junior believes that each asset’s risk can be assessed in two ways: in isolation and as part of the firm’s diversified portfolio of assets. The risk of the assets in isolation can be found by using the standard deviation and coefficient of variation of returns over the past 10 years. The capital asset pricing model (CAPM) can be used to assess the asset’s risk as part of the firm’s portfolio of assets. Applying some sophisticated quantitative techniques, Junior estimated betas for assets X and Y of 1.60 and 1.10, respectively. In addition he found that the risk-free rate is currently 7.0% and that the market return is 10.0%.

Calculate:

1) Expected return on a portfolio XY

2) Risk on a portfolio XY

Weight of each asset is 50%. Average annual return: asset X: 11.74% asset Y: 11.14% Standard deviation: asset X: 8.9 asset Y: 2.78