You are a portfolio manager of a risky portfolio with an expected rate of return of 14% and a standard deviation of 28%. The T-bill rate is 4%. Suppose your client decides to invest in your risky portfolio a proportion (y) of his total investment budget so that his overall portfolio will have an expected return of 10%.

a. What is the proportion y ?
b. What will be the standard deviation of your client’s portfolio ?
c. What is the Sharpe ratio ?
d. Suppose your client is wondering if he should switch his money in your fund to a passive portfolio invested to mimic the S&P 500 stock index yields an expected rate of return of 9% with a standard deviation of 25%. Show your client the maximum fee you could charge (as a percent of the investment in your fund deducted at the end of the year) that would still leave him at least as well off investing in your fund as in the passive one. (Hint: The fee will lower the slope of your client’s CAL by reducing the expected return net of the fee.) ?

Consider the following mutually exclusive projects:

Whichever project you choose, if any, you require 6 percent return on your investment.

What is the payback period for Project A?

What is the payback period for Project B?

What is the discounted payback period for project A?

What is the discounted payback period for project B?

What is the NPV for project A?

What is the NPV for project B?

What is the IRR for Project A?

What is the IRR for Project B?

What is the profitability index for Project A?

What is the profitability index for Project B?

The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 12% per year for the next 6 years and then decreasing the growth rate to 6% per year forever after. The company just paid its annual dividend in the amount of $1.46 per share. What is the current value of one share if the required rate of return is 8%?  ENTER YOUR ANSWER WITH TWO DECIMAL PLACEs (e.g., 12.25). ROUND TO THE NEAREST CENT. DO NOT USE THE DOLLAR SIGN ($) IN YOUR ANSWER.

**only work out using step by step not excel or any other program!! **

Last year Janet purchased a $1,000 face value corporate bond with an 11% annual coupon rate and a 30-year maturity. At the time of the purchase, it had an expected yield to maturity of 13.84%. If Janet sold the bond today for $925.66, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places.

When she becomes 25, Maggie invests $1,000 on the first day of each year for a period of ten years for a total investment of $10,000. She then stops and makes no further investments. Assume a 6% interest rate.

When he becomes 40, Ben invests $1.000 on the first day of each year for a period of 25 years for a total investment of $25,000. Assume a 6% interest rate. How much will Maggie and Ben have each when they reach age 65?

1) Assume that you are a speculator. What would you choose in terms of instruments: options or futures/ forwards? Explain your answer. Also if you believe that there is a trade-off between the two, clearly explain the cases when you would use one over the other?

a. ) Answer question 1 from the perspective of a US MNC

Exercise #4: A firm can lease a truck for 5 years at a cost of $45,000 annually. It can instead buy a truck at a cost of $95,000, with annual maintenance expenses of $25,000. The truck will be sold at the end of 5 years for $35,000. The cost of capital is 15%. Which is a better option? A. EAC of Lease = [11] B. PV of all Costs of Purchase = [12] C. EAC of Purchase = [13] D. Better Option is to …………[14]………………………….

Dewey Corp. is expected to have an EBIT of $2.45 million next year. Depreciation, the increase in net working capital, and capital spending are expected to be $180,000, $85,000, and $185,000, respectively. All are expected to grow at 18 percent per year for four years. The company currently has $13 million in debt and 800,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 2.5 percent indefinitely. The company’s WACC is 9.1 percent and the tax rate is 21 percent. What is the price per share of the company’s stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Blossom, Inc., has four-year bonds outstanding that pay a coupon rate of 8.00 percent and make coupon payments semiannually. If these bonds are currently selling at $911.89.

What is the yield to maturity that an investor can expect to earn on these bonds? (Round answer to 1 decimal place, e.g. 15.2%.)

Yield to maturity %

What is the effective annual yield? (Round answer to 1 decimal place, e.g. 15.2%.)

Effective annual yield %

The following are quotes from a currency dealer in the New York currency market:

6. Using the quotes provided above, how many US dollars would it cost to purchase one million

a. euros?

b. New Zealand dollars?

c. Mexican pesos?

e. Egyptian pounds?

Cornerstone Exercise 4.1 (Algorithmic) Applied Overhead and Unit Overhead Cost: Plantwide Rates Seco, Inc., produces two types of clothes dryers: deluxe and regular. Seco uses a plantwide rate based on direct labor hours to assign its overhead costs. The company has the following estimated and actual data for the coming year: Estimated overhead $1,862,000 Expected activity 49,000 Actual activity (direct labor hours): Deluxe dryer 13,000 Regular dryer 36,000 Units produced: Deluxe dryer 26,000 Regular dryer 180,000 Required: 1. Calculate the predetermined plantwide overhead rate, using direct labor hours. $ 38 per hour Calculate the applied overhead for each product, using direct labor hours. Applied overhead Deluxe $ Regular $ 2. Calculate the overhead cost per unit for each product. If required, round your answers to the nearest cent. Overhead Cost Deluxe $ 19 per unit Regular $ 52.60 per unit 3. What if the deluxe product used 26,000 hours (to produce 26,000 units) instead of 13,000 hours (total expected hours remain the same)? Calculate the effect on the profitability of this product line if all 26,000 units are sold. Profits would by $

Explain the following business terms:

• Explain what attestation means in business.
• Explain what assurance means in business.
• Explain what auditing means in business.

An investor believes that there will be a big jump in a stock price, but is uncertain as to the direction. Identify five different strategies the investor can follow. Compare and explain the differences between them.

A risk-free investment of $5000 will return 3%. A risky $5000 investment has a 23% chance of defaulting and returning only $3500. How much must the risky investment promise to return?

14.8%

13.0%

11.5%                                                         

12.9%