refer to the table of data below and answer the questions that follow

economic state probability of economic state return on stock J return on stock K

bear 0.25 -0.02 0.034

normal 0.60 0.138 0.062

bull 0.15 0.218 0.092

calculate the expected return of each stock

if a portfolio was created with from 30% of stock j and 70% of stock k what is the expected return of the portfolio?

calculate the standard deviation of each stock?

calculate the covariance between the two stocks

calculate the correlation coefficient between the two stocks

what is the portfolio standard deviation?

Davis is setting an investment plan with $10000 in 445 years until his retirement. His plan has two phases. In the first 20 years the rate of return is 8% per year, compounding semi-annually. In the last 25 years, the rate of return is 10% per year compounding annually.   

Required :- A) Calculate the effective ANNUAL interest rate (EAR) Davis receives during the first 20 years of his investment. B) Assume that at the end of the first 20 years. Davis decides to withdraw $5000 from his investment. How much money Davis will have in 45 years? C) If DAvis wishes to have exactly $600,000 in his account when he is retired, which is the rate of return should he has in the first 20 years? D) Assuming that at the end of the first 20, Davis changes his investment strategy and puts exactly $700 into a superannuation account at beginning of each month for the interest rates of 9% for the left 25 years. How much would be accumulates when he retires by this cash flow only? E) How much money Davis could accumulates for this cash flow alone if he puts that $700 at the end of each month rather than at the beginning of each month for 25 years. F) If at the first day of Davis retirement the superannuation fund starts to pay him $80,000 per year forever, what is the implied rate of return if the present value of this cash flow is $800,000?

jk stock currently sells for $50 a share. the stock has just paid a dividend of $2 a share. the dividend is expected to grow at a constant rate of 6% per year. what is the stock price that would be expected in one year from now? what is the required rate of return on jks stock?.

Suneview Ltd., a listed public company with actively traded securities, issued debentures with a total term of fifteen years and a face value of $1,000 to the public exactly five years ago for $1,000 each. The debentures were issued at an annual coupon interest rate of 12% p.a. with payments annually in arrears. Interest rates for debentures of a similar risk to those of Suneview Ltd. are currently (five years after originally being issued) being traded at a premium of 3% above the government bond rate. A new series of government bonds (Series XXIV) were issued today for a ten-year term at an annual coupon interest rate of 5% p.a. (with payments annually in arrears), a face value of $1,000 and a yield to bondholders of 7% p.a. Required:

1. Assume that a further three years has elapsed since the calculations undertaken in part a) of this question (a total of eight years after the original debenture issue) and the premium on Suneview Ltd. debentures has increased to 5% above the government bond rate. No further government bonds have been issued since Series XXIV bonds which closed trading today at a yield of 9% p.a.

1. How much would you now (a total of eight years after the original debenture issue) pay for Suneview Ltd. debentures?
2. Briefly discuss the possible ‘real-world’ factors that may have caused the differences in the premium on Suneview Ltd. debentures as compared to the government bond rate (from 3% to 5%).

JB Hi-Fi management is considering the two following options of buying a new equipment for a new investment project with the same initial cost. Year:- 0 , 1, 2, 3, 4 Project A :-, -$78500, $43000, $29000, $23000, $21000, Project B:-, -$78500, $21000, $28000 , $34000, $41000 A) which project the company should choose based on NPV Criterion if the required rate of return is 11%. B) Which project the company should choose based on P1 criterion if the required rate of return is 11%. C) Which project the company should choose if the payback criterion of minimum 3 years applies. D) After selecting the optimum project the company is thinking of financing the project which costs totally 1 million dollars by a capital structure of 40% of debt and 60% of equity . The dividend paid out to shareholders at the end of financial year is $1800000. Define the net profit of the company in the current year by applying the residual theory. E) compute the dividend payout ratio.

-Do you think it is better to buy and hold or to time the markets?
-What type of stock are you interested in? Any specific sectors or companies interest you?
-What would be your portfolio allocation percentages? (Now you can use bonds, stock, currency, precious metals, commodities, real estate, etc)
-Why do you choose this as your allocation?

Mr Chan’s son is three years old now and will be going to college in 15 years. Mr Chan would like to have $625,000 in a savings account to fund his education at that time. If the account promises to pay a fixed interest rate of 3% per year, how much money does Mr Chan need to put in the account today to ensure that he will have $625,000 in 15 years?

Professor Wendy Smith has been offered the following​ opportunity: A law firm would like to retain her for an upfront payment of $48,000. In​ return, for the next year the firm would have access to eight hours of her time every month. As an alternative payment​ arrangement, the firm would pay Professor​ Smith's hourly rate for the eight hours each month. ​ Smith's rate is $535 per hour and her opportunity cost of capital is 15% per year. What does the IRR rule advise regarding the payment​ arrangement? (Hint: Find the monthly rate that will yield an effective annual rate of 15%​. What about the NPV​ rule?

Discuss the two reasons that the disposition effect hurts investment performance

You are considering making a movie. The movie is expected to cost $10.9 million up front and take a year to produce. After​ that, it is expected to make $4.9 million in the year it is released and $1.8 million for the following four years. What is the payback period of this​ investment? If you require a payback period of two​ years, will you make the​ movie? Does the movie have positive NPV if the cost of capital is 10.6%​?

Massey Motors is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 10% a year for the next 3 years and then decreasing the growth rate to 4% per year. The company just paid its annual dividend in the amount of 1.00 per share. What is the current value of one stock if the required rate of return is 13.75?

Please include steps/ formulas involved for this problem

1. Differentiate barometric price leadership and dominant price leadership.

2. Is there a similarity between cartel pricing and monopoly pricing?

3. What conditions are favorable to the formation and maintenance of a cartel?

4. Can government be a potent force in the establishment and maintenance of monopolistic conditions? Name and describe such occurrences.

5. Describe the properties of the Baumol revenue maximization model. Do you consider this to be a good alternative to the profit maximization model?

6. Telephone companies charge different rates for calls during the day, in the evening, and at night or weekends. Do you consider this to be price discrimination?

Inflation has remained low for the past 5 years but you have come to the conclusion that trend is ending and inflation will increase significantly over the next 2 years. Assume you have reached this conclusion prior to other investors reaching the same conclusion. What adjustments should you make to your bond portfolio in light of your conclusions?

As a Division Manager you have $250,000 to invest in a new project. The Maverick Project Teams says that if you invest with them the company will receive returns of $70,000 after a year, $120,000 after two years and $120,000 after three years. The Bull Project Team says that if you invest with them the company will receive nothing for the first two years and then $370,000 at the end of the third year. The current annual discount rate is 6%. Create a worksheet that determines which project team offers the better financial return on the investment.

Suppose Disney issued a convertible (non-callable) bond with an annual coupon of 10% that matures in 5 years. The conversion ratio is 26.32 shares of stock per bond and Disney’s stock is currently trading at $30 per share. The convertible bond is priced at $900 in the market and the appropriate discount rate is 13%.

1. What is the Straight Bond Value of this convertible?
2. What is the Option Value of the Bond?
3. What is the Conversion Value of the Bond?
4. Based solely on today’s values, should you convert?