Consider the following variance-covariance 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 risk-free assets(t-bill) with capital allocation of 20% on T-bills 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.

(Bond valuation​) You own a 10​-year, ​$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 7​-year 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 ____%

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 2-year European call option with a $45 strike price? What if it’s an American call option?

(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?

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

18. If a not-for-profit 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?

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 thirty-years. 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 thirty-years you plan on depositing the balance the money into a money-market account that you expect should pay 2%. How much could you withdraw monthly, and have the money last for the next thirty years?

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	Short-term 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	Long-term liabilities
Total current assets	$1,628,702	$1,503,852	Debt	$7,285,512	$6,604,056
Long-term 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.

Describe how the cost of capital would change over different stages of a new venture? Explain the reason for such a pattern?

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

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.)

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 administrative expenses	$-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	Short-term 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	Long-term liabilities
Total current assets	$1,628,711	$1,502,456	Debt	$7,285,670	$6,603,931
Long-term 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.

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 administrative expenses	$-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	Short-term 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	Long-term liabilities
Total current assets	$1,629,585	$1,505,067	Debt	$7,285,372	$6,603,223
Long-term 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.

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 six-month period, calculate the accrued principal and coupon payment. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

	Accrued Principal Coupon Payment First 6 months Second 6 months Third 6 months Fourth 6 months

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 administrative expenses	$-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	Short-term 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	Long-term liabilities
Total current assets	$1,629,147	$1,503,349	Debt	$7,286,198	$6,603,683
Long-term 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.