Assume that security returns are generated by the single-index model, Ri = αi + βiRM + ei where Ri is the excess return for security i and RM is the market’s excess return. The risk-free rate is 2%. Suppose also that there are three securities A, B, and C, characterized by the following data: Security βi E(Ri) σ(ei) A 0.8 10 % 25 % B 1.0 12 10 C 1.2 14 20

a. If σM = 20%, calculate the variance of returns of securities A, B, and C. (Do not round intermediate calculations. Round your answers to the nearest whole number.)

b. Now assume that there are an infinite number of assets with return characteristics identical to those of A, B, and C, respectively. What will be the mean and variance of excess returns for securities A, B, and C? (Enter the variance answers as a percent squared and mean as a percentage. Do not round intermediate calculations. Round your answers to the nearest whole number.)

Describe the Theory of Efficient Markets. What is the primary notion of the Theory of Efficient Markets?

Compare and contrast the Dow Jones Industrial Average and the S & P 500.

Discuss the essential characteristics of common stock.

home / study / business / finance / finance questions and answers / Please Give Us One Example From Your Research, Work, Or Personal Life Discussing The Basic ... Question: Please give us one example from your research, work, or personal life discussing The basic types... Please give us one example from your research, work, or personal life discussing Different methods of capital budgeting rationalization such as NPV, IRR, and Payback

How can a firm reduce cost of equity?

^^^ Those are the answers of the first part of part a, I just need the chart below for a, and then b and c

NOTE: b is NOT 6.34, and c is NOT 296.96

Burry suggests there is a passive investing ‘bubble’. What are the characteristics of equities that are most exposed to a passive investing ‘bubble’?

1. Benefit-cost Analysis

Park Crest Hospital is looking into the possibility of upgrading its patient tracking information system. The current system is a management information system (MIS) that maintains records on the active status of patients residing in the hospital at a given moment. It ties into patient medical treatment files and financial history files. Thus it is possible to determine the current disposition of patients residing in the hospital (e.g., room number, telephone number, attending physicians, attending nurses, etc.); to access facts about the patient’s prior medical history; and to access financial data on current and past charges made to the patient.

The current MIS is more than seven years old. In view of changes in information storage and retrieval technology that have recently occurred, as well as the current system’s inability to deal with changes that have been made to handle the patient medical treatment files, Park Crest management has decided to upgrade its patient tracking information system. Dr. Ralph Kopecky is made head of a task force to identify possible systems that can replace the existing one.

A one-month search unearths two products that are good candidates. Each is an off-the-shelf product that will be modified by the vendor to fit into a client’s existing environment. After lengthy discussions with the vendors, Dr. Kopecky developed the cost and benefit data that appear in the accompanying exhibit. He will employ these data to educate members of the Executive Management Committee about costs and benefits associated with the alternative solutions.

Questions:

1. Using the data contained in the exhibit, compute the benefit-cost ratios associated with adopting System A and System B.

2. Given the data contained in the exhibit, does it make sense from a financial perspective to abandon the current MIS and to adopt a new one? Explain your reasoning.
3. Using the data contained in the exhibit, which solution – System A or System B – is more attractive from a purely financial point of view? Write up your views in a one-page, single-spaced report that will be submitted to the Executive Management Committee.
4. What are the limitations of taking a purely financial approach to selecting a product that will enable Park Crest Hospital to meet its business needs? What other factors should be taken into account?

'Risk management is not about elimination of risk', Discuss in detail

Consider a two-period binomial model in which a stock currently trades at a price of K65. The stock price can go up 20 percent or down 17 percent each period. The risk-free rate is 5 percent. Calculate the price of a put option expiring in two periods with exercise price of K60.

What does a beta coefficient measure?

(This will be a presentation question, please guide thoroughly. Thank you!)

Assume that sales will grow at 5.00%. The following accounts (cash, accounts receivable, inventory, net fixed assets, accounts payable and accruals, as well as operating costs) are assumed to change with sales and will maintain their current percentage of sales rates into 2016. The dividend payout ratio will remain the same. Long-term debt and notes payable will remain constant into 2016 as will interest expense, as a result. The firm also does not plan to issue any additional common stock or conduct any share repurchases. The firm’s tax rate is 40%. Any additional funds needed will be sourced through a line-of-credit (LOC) and surpluses will be paid out through a special dividend.

BALANCE SHEET AS OF 12/31/2015:

In the following questions, determine the percentage-of-sale forecast factors:

Describe how, by use of the capital asset pricing model, you might select a suitable
risk discount rate to use in profitability measurement.

(This will be a presentation question, please guide thoroughly. Thank you!)

Describe the advantages and disadvantages to existing shareholders of funding expansion using convertible loan stock.

(This will be a presentation question, please guide thoroughly. Thank you!)