Consider the following variancecovariance matrix
rm  rA  rB  rC  rD  
rM  0.41  
rA  0.43  0.65  
rB  0.49  0.39  0.84  
rC  0.30  0.13  0.30  0.58  
rD  0.50  0.43  0.61  0.34  1.48 
Average return
rM  rA  rB  rC  rD  R  
average return  0.0585  0.1122  0.0314  0.0525  0.0563  0.03 
a. if you would like to create a risky protfolio X of two stocks  stock A and stock C, how would you allocate your investments? identify the minimum variance portfolio consisting of stocks A and C
b. what is the risk(standard deviation) and return(mean) of your minimum variance portfolio consisting of stock A & C in part (a)? Compute the Sharpe ratio of your minimum variance portfolio.
c. if your complete portfolio Z consists of risky portfolio X and riskfree assets(tbill) with capital allocation of 20% on Tbills and remaining on risky assets, what is the return and standard deviation of your complete portfolio Z. Compare your answers with answer in part (b)
d. Estimate the systematic risk(beta) of each stock(stock A, B,C and D) required rate of return for each stock.
e. Identify each stock whether it is overpriced or underpriced or correctly priced
f. If you have a risky portfolio Y which consists of all four stocks with eq. what is your portfolio beta. What is the required rate of return on you as postulated by SML.
In: Finance
(Bond valuation) You own a 10year, $1,000 par value bond paying 6.5 percent interest annually. The market price of the bond is $925, and your required rate of return is 9 percent.
a. Compute the bond's expected rate of return.
b. Determine the value of the bond to you, given your required
rate of return.
c. Should you sell the bond or continue to own it?
____________________________________________________________________________________________
(Yield to maturity) Assume the market price of a 7year bond for Margaret Inc. is $1,100, and it has a par value of $ $1,000. The bond has an annual interest rate of 9% that is paid semiannually. What is the yield to maturity of the bond?
The yield to maturity of the bond is ____%
In: Finance
The current price of Gringotts Bank Corporation is $50. The price will increase by 40% or fall by 35% during each of the next two years. The company will pay a $9 dividend at the end of the first year if the stock price has risen, and will pay a $4 dividend if the price has fallen. It will not pay any dividends at the end of second year. The annualized, continuously compounded interest rate is 5%. What is the value of a 2year European call option with a $45 strike price? What if it’s an American call option?
In: Finance
(Bond valuation) You are examining three bonds with a par value of $1,000 (you receive $1,000 at maturity) and are concerned with what would happen to their market value if interest rates (or the market discount rate) changed.
The three bonds are
Bond Along dash—a bond with 33 years left to maturity that has an
annual coupon interest rate of 12 percent, but the interest is
paid semiannually.
Bond Blong dash—a bond with 11 years left to maturity that has an
annual coupon interest rate of 12 percent, but the interest is
paid semiannually.
Bond Clong dash—a bond with 17 years left to maturity that has an
annual coupon interest rate of 12 percent, but the interest is
paid semiannually.
What would be the value of these bonds if the market discount rate
were
a. 12 percent per year compounded semiannually?
b. 3 percent per year compounded semiannually?
c. 16 percent per year compounded semiannually?
d. What observations can you make about these results?
In: Finance
Explain briefly how each of the following transactions would affect a company’s balance sheet. Remember, assets must equal liabilities plus owners’ equity before and after the transaction.
a) Sale of used equipment with a book value of $300,000 for $500,000 cash.
b) Purchase of a new $80 million building, financed 40 percent with cash and 60 percent with a bank loan.
c) Purchase of a new building for $60 million cash.
d) A $40,000 payment to trade creditors.
e) A firm’s repurchase of 10,000 shares of its own stock at a price of $24 per share.
f) Sale of merchandise for $80,000 in cash.
g) Sale of merchandise for $120,000 on credit.
h) Dividend payment to shareholders of $50,000
In: Finance
18. If a notforprofit clinic has $70,000 in assets and $40,000 in liabilities, what is their equity balance?
12. What are the differences between the income statement and balance sheet in regard to timing and organization?
19. Should financial statement and operating indicator analyses be conducted only on historical data?
20. What is the difference between trend analysis and comparative analysis?
13. What are the three major categories of assets?
In: Finance
You just started your first full time job out of college. You recall from your finance course the importance of starting to save early for retirement. You plan on making deposits of $215 per pay check into a stock account and $130 per pay check into a bond account. You are paid every two weeks (26 pay checks per year). It is your plan to make these deposits for the next thirtyyears. You expect that you will earn 8.75% per year on the stock account and 5.5% on the bond account. When you retire in thirtyyears you plan on depositing the balance the money into a moneymarket account that you expect should pay 2%. How much could you withdraw monthly, and have the money last for the next thirty years?
In: Finance
Financial ratios: Profitability. The financial statements for Tyler Toys, Inc. are shown below. Calculate the profit margin, return on assets, and return on equity for 2013 and 2014 for Tyler Toys. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the shareholders?
Tyler Toys, Inc. 

Income Statement for Years Ending December 31, 2013 and 2014 

2014 
2013 

Revenue 
$14,147,036 
$13,566,155 
Cost of goods sold 
$8,447,557 
$8,131,158 
Selling, general, and administrative expenses 
$997,273 
$980,121 
Depreciation 
$1,498,746 
$1,472,768 
EBIT 
$3,203,460 
$2,982,108 
Interest expense 
$376,332 
$355,167 
Taxes 
$1,074,309 
$998,238 
Net income 
$1,752,819 
$1,628,703 
Tyler Toys, Inc. 

Balance Sheet as of December 31, 2013 and 2014 

ASSETS 
2014 
2013 
LIABILITIES 
2014 
2013 
Current assets 
Current liabilities 

Cash 
$190,940 
$187,570 
Accounts payable 
$1,545,880 
$1,455,686 
Investments 
$181,149 
$121,240 
Shortterm debt 
$312,342 
$333,103 
Accounts receivable 
$668,147 
$630,715 
Total current liabilities 
$1,858,222 
$1,788,789 
Inventory 
$588,466 
$564,327 
Longterm liabilities 

Total current assets 
$1,628,702 
$1,503,852 
Debt 
$7,285,512 
$6,604,056 
Longterm assets 
Other liabilities 
$1,463,963 
$1,345,334 

Investments 
$3,053,227 
$2,827,600 
Total liabilities 
$10,607,697 
$9,738,179 
Plant, property, and equipment 
$8,497,215 
$8,481,174 
OWNERS’ EQUITY 

Goodwill 
$348,708 
$346,172 
Common stock 
$1,457,797 
$1,454,890 
Intangible assets 
$1,158,090 
$957,807 
Retained earnings 
$2,620,448 
$2,923,536 
Total owners’ equity 
$4,078,245 
$4,378,426 

TOTAL LIABILITIES 

TOTAL ASSETS 
$14,685,942 
$14,116,605 
AND OWNERS’ EQUITY 
$14,685,942 
$14,116,605 
What is the profit margin for 2014? _________ (Round to two decimal places.)
What is the profit margin for 2013? ________ (Round to two decimal places.)
What is the return on assets for 2014? ________ (Round to two decimal places.)
What is the return on assets for 2013? _______ (Round to two decimal places.)
What is the return on equity for 2014? ________ (Round to two decimal places.)
What is the return on equity for 2013? ________ (Round to two decimal places.)
Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the shareholders? (Select the best response.)
A.These ratios indicate a somewhat strong firm performance for the equity holders with an ROE of over 43.01 % for 2014.
B.These ratios indicate a somewhat weak firm performance for the equity holders with an ROE of over 43.01 % for 2013.
C.These ratios indicate a somewhat weak firm performance for the equity holders with an ROE of over 43.01 % for 2014.
D.These ratios indicate a somewhat strong firm performance for the equity holders with an ROE of over 43.01 % for 2013.
In: Finance
Describe how the cost of capital would change over different stages of a new venture? Explain the reason for such a pattern?
In: Finance
How to write an essay about people who prepare themselves for career that will enable them to contribute to society.How many pages should be
In: Finance
Selling bonds. Berkman Investment Bank has the following bond deals under way shown below. Determine the net proceeds of each bond and the cost of the bonds for each company in terms of yield. The bond yield in the table is the market yield before the bank charges its commission. Assume all bonds are semiannual and issued at a par value of $1,000.
Company 
Bond Yield 
Commission 
Coupon Rate 
Maturity 

Rawlings 
6.9% 
1.7% of sale price 
0.0% 
20 years 

Wilson 
7.8% 
3.4 % of sale price 
8.8% 
20 years 

Louis Sluggers 
7.6% 
2.1 % of sale price 
9.3% 
10 years 

Spalding 
7.9% 
4.3 % of sale price 
7.2% 
20 years 

Champions 
8.1% 
3.3 % of sale price 
6.7% 
30 years 
For Rawlings, the market price of the bond is $ _________ (Round to the nearest cent.)
The net price of the bond is $ ________ (Round to the nearest cent.)
The yield to maturity of the bond is ________% (Round to four decimal places.)
For Wilson, the market price of the bond is $ __________ (Round to the nearest cent.)
The net price of the bond is $ __________ (Round to the nearest cent.)
The yield to maturity of the bond is ________% (Round to four decimal places.)
For Louis Sluggers, the market price of the bond is $ ________ (Round to the nearest cent.)
The net price of the bond is $ ________ (Round to the nearest cent.)
The yield to maturity of the bond is ________% (Round to four decimal places.)
For Spalding, the market price of the bond is $ ________ (Round to the nearest cent.)
The net price of the bond is $ ________ (Round to the nearest cent.)
The yield to maturity of the bond is ________% (Round to four decimal places.)
For Champions, the market price of the bond is $ _________ (Round to the nearest cent.)
The net price of the bond is $ ________ (Round to the nearest cent.)
The yield to maturity of the bond is _______% (Round to four decimal places.)
In: Finance
Financial ratios: Asset management. The financial statements for Tyler Toys, Inc. are shown below. Calculate the inventory turnover, days' sales in inventory, receivables turnover, days' sales in receivables, and total asset turnover for 2013 and 2014 for Tyler Toys. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the shareholders?
Tyler Toys, Inc. 

Income Statement for Years Ending December 31, 2013 and 2014 

2014 
2013 

Revenue 
$14,147,844 
$13,566,081 
Cost of goods sold 
$8,448,121 
$8,131,751 
Selling, general, and 
$997,351 
$981,956 
Depreciation 
$1,498,005 
$1,471,279 
EBIT 
$3,204,367 
$2,981,095 
Interest expense 
$375,975 
$355,216 
Taxes 
$1,074,789 
$997,834 
Net income 
$1,753,603 
$1,628,045 
Tyler Toys, Inc. 

Balance Sheet as of December 31, 2013 and 2014 

ASSETS 
2014 
2013 
LIABILITIES 
2014 
2013 
Current assets 
Current liabilities 

Cash 
$191,800 
$186,995 
Accounts payable 
$1,545,434 
$1,456,815 
Investments 
$180,888 
$120,534 
Shortterm debt 
$311,087 
$333,794 
Accounts receivable 
$667,251 
$631,113 
Total current liabilities 
$1,856,521 
$1,790,609 
Inventory 
$588,772 
$563,814 
Longterm liabilities 

Total current assets 
$1,628,711 
$1,502,456 
Debt 
$7,285,670 
$6,603,931 
Longterm assets 
Other liabilities 
$1,462,111 
$1,346,207 

Investments 
$3,053,195 
$2,828,266 
Total liabilities 
$10,604,302 
$9,740,747 
Plant, property, and equipment 
$8,496,792 
$8,481,309 
OWNERS’ EQUITY 

Goodwill 
$347,021 
$347,194 
Common stock 
$1,457,331 
$1,453,971 
Intangible assets 
$1,158,088 
$957,411 
Retained earnings 
$2,622,174 
$2,921,918 
Total owners’ equity 
$4,079,505 
$4,375,889 

TOTAL LIABILITIES 

TOTAL ASSETS 
$14,683,807 
$14,116,636 
AND OWNERS’ EQUITY 
$14,683,807 
$14,116,636 
What is the inventory turnover ratio for 2014? ________ (Round to four decimal places.)
What is the inventory turnover ratio for 2013? ________ (Round to four decimal places.)
What is the days' sales in inventory ratio for 2014? ________ days (Round to four decimal places.)
What is the days' sales in inventory ratio for 2013? ________ days (Round to four decimal places.)
What is the receivables turnover ratio for 2014? ________ (Round to four decimal places.)
What is the receivables turnover ratio for 2013? _________ (Round to four decimal places.)
What is the days' sales in receivables ratio for 2014? _______ days (Round to four decimal places.)
What is the days' sales in receivables ratio for 2013? _______ days (Round to four decimal places.)
What is the total asset turnover ratio for 2014? _______ (Round to four decimal places.)
What is the total asset turnover ratio for 2013? ________ (Round to four decimal places.)
Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the shareholders? (Select the best response.)
A. The company has a very poor turnover of assets and collects its receivables quickly; thus there are some concerns from these ratios.
B. The company has a very good turnover of assets but collects its receivables slowly; thus there are some real concerns from these ratios.
C. The company has a very good turnover of assets and collects its receivables quickly; thus there are major concerns from these ratios.
D. The company has a very good turnover of assets and collects its receivables quickly; thus there are no real concerns from these ratios.
In: Finance
Financial ratios: Financial leverage. The financial statements for Tyler Toys, Inc. are shown below. Calculate the debt ratio, times interest earned ratio, and cash coverage ratio for 2013 and 2014 for Tyler Toys. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the shareholders?
Tyler Toys, Inc. 

Income Statement for Years Ending December 31, 2013 and 2014 

2014 
2013 

Revenue 
$14,146,008 
$13,566,936 
Cost of goods sold 
$8,448,426 
$8,131,134 
Selling, general, and 
$998,344 
$981,543 
Depreciation 
$1,497,033 
$1,471,281 
EBIT 
$3,202,205 
$2,982,978 
Interest expense 
$375,885 
$355,036 
Taxes 
$1,074,002 
$998,618 
Net income 
$1,752,318 
$1,629,324 
Tyler Toys, Inc. 

Balance Sheet as of December 31, 2013 and 2014 

ASSETS 
2014 
2013 
LIABILITIES 
2014 
2013 
Current assets 
Current liabilities 

Cash 
$190,181 
$187,027 
Accounts payable 
$1,546,608 
$1,456,241 
Investments 
$181,543 
$121,902 
Shortterm debt 
$311,633 
$332,971 
Accounts receivable 
$668,944 
$631,449 
Total current liabilities 
$1,858,241 
$1,789,212 
Inventory 
$588,917 
$564,689 
Longterm liabilities 

Total current assets 
$1,629,585 
$1,505,067 
Debt 
$7,285,372 
$6,603,223 
Longterm assets 
Other liabilities 
$1,463,238 
$1,346,613 

Investments 
$3,053,588 
$2,827,617 
Total liabilities 
$10,606,851 
$9,739,048 
Plant, property, and equipment 
$8,497,812 
$8,481,131 
OWNERS’ EQUITY 

Goodwill 
$347,644 
$347,719 
Common stock 
$1,458,998 
$1,454,254 
Intangible assets 
$1,158,701 
$956,816 
Retained earnings 
$2,621,481 
$2,925,048 
Total owners’ equity 
$4,080,479 
$4,379,302 

TOTAL LIABILITIES 

TOTAL ASSETS 
$14,687,330 
$14,118,350 
AND OWNERS’ EQUITY 
$14,687,330 
$14,118,350 
What is the debt ratio for 2014? ________ (Round to four decimal places.)
What is the debt ratio for 2013? ________ (Round to four decimal places.)
What is the times interest earned ratio for 2014? ________ (Round to four decimal places.)
What is the times interest earned ratio for 2013? _______ (Round to four decimal places.)
What is the cash coverage ratio for 2014? ______ (Round to four decimal places.)
What is the cash coverage ratio for 2013? ______ (Round to four decimal places.)
Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the shareholders? (Select the best response.)
A. The debt ratio is very high and would warrant concern if the cash coverage ratio or the times interest earned ratio was high, but with low ratios this means they are handling their large debt well.
B. The debt ratio is very low and would warrant concern if the cash coverage ratio or the times interest earned ratio was high, but with low ratios this means they are handling their large debt well.
C. The debt ratio is very high and would warrant concern if the cash coverage ratio or the times interest earned ratio was low, but with high ratios this means they are handling their large debt well.
D. The debt ratio is very low and would warrant concern if the cash coverage ratio or the times interest earned ratio was low, but with high ratios this means they are handling their large debt well.
In: Finance
Suppose you purchase a $1,000 TIPS on January 1, 2016. The bond carries a fixed coupon of 1 percent. Over the first two years, semiannual inflation is 2 percent, 2 percent, 4 percent, and 2 percent, respectively. For each sixmonth period, calculate the accrued principal and coupon payment. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

In: Finance
Financial ratios: Financial leverage. The financial statements for Tyler Toys, Inc. are shown below. Calculate the debt ratio, times interest earned ratio, and cash coverage ratio for 2013 and 2014 for Tyler Toys. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the shareholders?
Tyler Toys, Inc. 

Income Statement for Years Ending December 31, 2013 and 2014 

2014 
2013 

Revenue 
$14,147,996 
$13,566,458 
Cost of goods sold 
$8,448,120 
$8,131,722 
Selling, general, and 
$998,889 
$981,908 
Depreciation 
$1,497,938 
$1,472,552 
EBIT 
$3,203,049 
$2,980,276 
Interest expense 
$376,826 
$355,607 
Taxes 
$1,073,965 
$997,374 
Net income 
$1,752,258 
$1,627,295 
Tyler Toys, Inc. 

Balance Sheet as of December 31, 2013 and 2014 

ASSETS 
2014 
2013 
LIABILITIES 
2014 
2013 
Current assets 
Current liabilities 

Cash 
$191,401 
$186,591 
Accounts payable 
$1,546,332 
$1,456,738 
Investments 
$181,004 
$121,148 
Shortterm debt 
$312,545 
$333,684 
Accounts receivable 
$667,879 
$630,653 
Total current liabilities 
$1,858,877 
$1,790,422 
Inventory 
$588,863 
$564,957 
Longterm liabilities 

Total current assets 
$1,629,147 
$1,503,349 
Debt 
$7,286,198 
$6,603,683 
Longterm assets 
Other liabilities 
$1,463,915 
$1,345,076 

Investments 
$3,054,247 
$2,828,820 
Total liabilities 
$10,608,990 
$9,739,181 
Plant, property, and equipment 
$8,497,918 
$8,481,883 
OWNERS’ EQUITY 

Goodwill 
$347,478 
$346,589 
Common stock 
$1,458,147 
$1,454,033 
Intangible assets 
$1,157,338 
$957,445 
Retained earnings 
$2,618,991 
$2,924,872 
Total owners’ equity 
$4,077,138 
$4,378,905 

TOTAL LIABILITIES 

TOTAL ASSETS 
$14,686,128 
$14,118,086 
AND OWNERS’ EQUITY 
$14,686,128 
$14,118,086 
What is the debt ratio for 2014? ________ (Round to four decimal places.)
What is the debt ratio for 2013? ________ (Round to four decimal places.)
What is the times interest earned ratio for 2014? ________ (Round to four decimal places.)
What is the times interest earned ratio for 2013? _______ (Round to four decimal places.)
What is the cash coverage ratio for 2014? ______ (Round to four decimal places.)
What is the cash coverage ratio for 2013? ______ (Round to four decimal places.)
Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the shareholders? (Select the best response.)
A. The debt ratio is very high and would warrant concern if the cash coverage ratio or the times interest earned ratio was high, but with low ratios this means they are handling their large debt well.
B. The debt ratio is very low and would warrant concern if the cash coverage ratio or the times interest earned ratio was high, but with low ratios this means they are handling their large debt well.
C. The debt ratio is very high and would warrant concern if the cash coverage ratio or the times interest earned ratio was low, but with high ratios this means they are handling their large debt well.
D. The debt ratio is very low and would warrant concern if the cash coverage ratio or the times interest earned ratio was low, but with high ratios this means they are handling their large debt well.
In: Finance