Discuss the reasons broker-dealers tend to hold less equity capital than commercial banks.

I need to see this work done in excel please using formulas. Thank you!

4) You are saving for retirement in 20 years. Today, you place $100,000 in a bank account that pays 4% interest, compounded annually, leaving the funds on deposit for the entire 20 years. You also contribute $2,000 each year into your pension plan for 10 years, beginning this year. The pension plan grows at 7% a year. How much do you have available for retirement, 20 years from now? BE CAREFUL; this is a multi-step problem.

A corporate bond matures on October 31, 2035. Its coupon rate is 5.00% and face value is $100. Its yield is 5.90%. How much is its price on June 3, 2020?

What would you pay for a $140,000 debenture bond that matures in 15 years and pays $7,000 a year in interest if you wanted to earn a yield of:

4%

5%

6%

Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with a retirement income of $30,000 per month for 20 years, with the first payment received 30 years and 1 month from now. Second, he would like to purchase a cabin in Rivendell in 10 years at an estimated cost of $380,000. Third, after he passes on at the end of the 20 years of withdrawals, he would like to leave an inheritance of $950,000 to his nephew Frodo. He can afford to save $3,300 per month for the next 10 years. If he can earn an EAR of 10 percent before he retires and an EAR of 7 percent after he retires, how much will he have to save each month in Years 11 through 30? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is no planned increase in production. The PJX5 will reduce costs by squeezing more juice from each plum and doing so in a more efficient manner. Mr. Bensen gave Derek the following information. What is the NPV of the PJX5?

a. The PJX5 will cost $1.78 million fully installed and has a 10 year life. It will be depreciated to a book value of $242,327.00 and sold for that amount in year 10.

b. The Engineering Department spent $14,645.00 researching the various juicers.

c. Portions of the plant floor have been redesigned to accommodate the juicer at a cost of $23,737.00.

d. The PJX5 will reduce operating costs by $463,693.00 per year.

e. CSD’s marginal tax rate is 34.00%.

f. CSD is 65.00% equity-financed.

g. CSD’s 18.00-year, semi-annual pay, 5.78% coupon bond sells for $987.00.

h. CSD’s stock currently has a market value of $20.88 and Mr. Bensen believes the market estimates that dividends will grow at 3.30% forever. Next year’s dividend is projected to be $1.54.

Suppose you live in a world with only two risky assets: Amazon and Facebook (you can label these assets A and F, respectively). Furthermore, suppose these assets have the following expected returns and standard deviations:

a)If the correlation of Amazon and Facebook returns is equal to 0.3, what is the covariance of their returns?

Use Excel to calculate the expected return and standard deviation of the risky portfolio for different combinations of weights for A and F. In other words, set up your Excel spreadsheet to calculate the following:

etc… (for additional combinations of weights from w_A = -0.5 to w_A = 1.5)

Please include a screenshot of the filled-in table with your problem set solutions.

a)What is the optimal risky portfolio assuming r_f = 2% as in part e? Label this point P on your graph from part d.(Hint: Use Solver to choose the risky portfolio weights that maximize the Sharpe Ratio of the CAL created by combining the risky portfolio and the risk-free asset.)

b) Draw in the CAL through the optimal portfolio from part a.

c) What is the expected return and standard deviation of the complete portfolio that invests y=0.4 (i.e. 40%) in the optimal risky portfolio and 1-y = 0.6 (i.e 60%) in the risk-free asset.

d) If your utility from investing in the market is given by U = Er - 12σ² – 10σ⁴ , what is your optimal complete portfolio? (Hint: Use Solver to find the % of your complete portfolio in the risky asset (i.e. y) that maximizes your utility.)

e)What is a possible intuition of including the σ⁴ term in the utility function in part b?

Levi Strauss & Company has an outstanding B-rated bond that has a coupon rate of 12.25%, a face value of $1000 and is currently priced at $1117.50. If this bond pays interest semi-annually and matures in 4 years,

1. what is its yield to maturity (YTM)?
2. Is this bond sold at a premium? Explain.
3. What is its current yield?
4. What would happen to the price of this bond if the real interest rate increases?

Carlsbad Corporation's sales are expected to increase from $5 million in 2016 to $6 million in 2017, or by 20%. Its assets totaled $2 million at the end of 2016. Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2016, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. Its profit margin is forecasted to be 4%

a. Assume that the company pays no dividends. Under these assumptions, what would be the additional funds needed for the coming year? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest cent. $

b

Why is this AFN different from the one when the company pays dividends?

I. Under this scenario the company would have a lower level of retained earnings, which would increase the amount of additional funds needed.

II Under this scenario the company would have a lower level of retained earnings, which would decrease the amount of additional funds needed.

III Under this scenario the company would have a higher level of retained earnings, which would reduce the amount of additional funds needed

IV Under this scenario the company would have a higher level of retained earnings, which would reduce the amount of assets needed

v Under this scenario the company would have a higher level of spontaneous liabilities, which would reduce the amount of additional funds needed.

1. Ace Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows.

Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%.

Instructions

a.  

Compute the cash payback period for each project. (Round to two decimals.)

b.  

Compute the net present value for each project. (Round to nearest dollar.)

c.  

Compute the annual rate of return for each project. (Round to two decimals.)

d.  

Rank the projects on each of the foregoing bases. Which project do you recommend?

On Monday, November 11, a financial advisor pitches you an investment opportunity for 10 years at a guaranteed 5% rate of return. You have until Friday to decide whether to invest or turn the offer down. What is your decision? Do you have any concerns? You must support your answer.

The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next three months. You do not know whether it will go up or down, however. The current price of the stock is $100 per share, and the price of a 3-month call option at an exercise price of $100 is $10.

1. If the risk-free interest rate is 10% per year,what must be the price of a 3-month put option on P.U.T.T. stock at an exercise price of $100? (The stock pays no dividends.)

2. What would be a simple options strategy to exploit your conviction about the stock price’s future movements? How far would it have to move in either direction for you to make a profit on your initial investment?