A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 4.7%. The probability distributions of the risky funds are:

The correlation between the fund returns is 0.1065.

What is the Sharpe ratio of the best feasible CAL?

PLEASE DO NOT ROUND ANY NUMBERS UNTIL FINAL ANSWER OR ELSE IT WILL BE INCORRECT.

Sun National Bank is considering adding a new branch bank. They know that it will cost $1.25 million to build the branch and they believe that it will generate $220,000 per year for the next 30 years. Sun National Bank requires a return of 10% on all new projects it undertakes. What is this project’s net present value? (10 points) (Show all calculations for full credit. Simply entering a single value will earn no credit.)

D0=1.00

Dividend is expected to grow at 8% for 10 years, then 5% indefinitely. R=8% for the next 4 years, R=7% for the following 3 years, then 6% indefinitely.

What is today's expected stock price?

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 6%. The probability distribution of the risky funds is as follows:

The correlation between the fund returns is 0.09.

What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Enter your answers as decimals rounded to 4 places.)

Erika and Kitty, who are twins, have aspirations to become millionaires. Each plans to make a $10,000 annual contribution to her “early retirement fund”, beginning a year from today. Erika plans to open an account with the Safety First Bond Fund, a mutual fund that invests in high-quality bonds whose investors have earned 3 percent per year in the past. Kitty will invest in the New Issue Bio-Tech Fund, which invests in small, newly issued bio-tech stocks and whose investors on average have earned 9 percent per year in the fund’s relatively short history.

a) If the two women’s funds earn the same returns in the future as in the past, how much will each twin have in her account at the end of five years? (Use the step-by-step approach.) (5 points)

b) How long will it take each twin to accumulate $1,000,000? (Use your financial calculator.) (2 points)

c) How large would Erika’s annual contributions need to be for her to become a millionaire in 25 years? (Use your financial calculator.) (1 point)

QPM has sales per share of $48.08, earnings per share of $7.58, book value per share of $20.59, and dividends per share of $3.84. You have determined that relevant market multiples for QPM would be a price/sales ratio of 3.6x, a P/E ratio of 22.8x, a price/book ratio of 8.7x, and a dividend yield of 2.22%. You calculate a QPM price per share based on each ratio, and then estimate the value as the simple average of these four prices. What should be the value per share of QPM? (Enter your answer to the nearest $0.01. Leave the $ sign off. In other words, if your answer is $55.55, enter 55.55 for your answer.)

In 1626, Dutchman Peter Minuit purchased Manhattan Island from a local Native American tribe. Historians estimate that the price he paid for the island was about $24 worth of goods, including beads, trinkets, cloth, kettles, and axe heads. Many people find it laughable that the island would be sold for $24, but you need to consider the future value (FV) of that price in more current times. If the $24 purchase price could have been invested at a 4.75% annual interest rate, what is its value as of 2012 (386 years later)?

A bond that pays annual coupons has a par value of $1,000, an 8% coupon rate, 3 years left to maturity, and is currently priced at a YTM of 6.0%.

(a) Calculate duration and modified duration for the bond.

(b) If the YTM on the bond changes from its current 6.0% up to 8.0%, what price change (% and $) and new price ($) is predicted by the modified duration calculated in part a.?

(c) What is the size and direction of the pricing error in the duration-predicted price you calculated in part (b)?

Show all work and show the formulas used for the calculations.

Given the information below:

*Assume a tax rate of 24% round to the nearest dollar

Calculate the following for 2018. Show all work or formulas used.

Free Cash Flow (Cash Flow from Assets):

Cash Flow to Owners:

Cash Flow to Creditors:

From California to New York, legislative bodies across the United States are considering eliminating or reducing the surcharges that banks impose on noncustomers, who make $12 million in withdrawals from other banks’ ATM machines. On average, noncustomers earn a wage of $26 per hour and pay ATM fees of $3.50 per transaction. It is estimated that banks would be willing to maintain services for 4 million transactions at $1.50 per transaction, while noncustomers would attempt to conduct 19 million transactions at that price. Estimates suggest that, for every 1 million gap between the desired and available transactions, a typical consumer will have to spend an extra minute traveling to another machine to withdraw cash.

Based on this information, what would be the nonpecuniary cost of legislation that would place a $1.50 cap on the fees banks can charge for noncustomer transactions?

Instructions: Enter your responses rounded to the nearest penny (two decimal places).

$ 0

What would be the full economic price of this legislation?

$ 0

Both John and Mary are aged 20 now. John plans to contribute $168 per month

in advance into his superannuation fund for 20 years and stop contributing thereafter.

Mary plans to start contributing $336 per month in advance into her superannuation fund

at her 40th birthday until she retires.

They both plan to retire at age 60.

If the annual rate of return is 12.80%, what are the accumulated values of their

superannuation accounts at retirement?

Assume: NO fees, NO tax.

One bond has a coupon rate of 6.0%, another a coupon rate of 8.0%. Both bonds pay interest annually, have 6-year maturities, and sell at a yield to maturity of 7.0%. a. If their yields to maturity next year are still 7.0%, what is the rate of return on each bond? (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.)

Rate of return Bond 1 _______ Bond 2___________

b. Does the higher-coupon bond give a higher rate of return over this period?

Yes/No

If a savings account pays 6% p.a. interest rate, how much money do you need to deposit to accumulate $72,566 in 9 years? Note that the bank will compound interest monthly.

Question 2

Pat and Sam are a couple with two young children, Cassandra, aged 3, and Clairvoyance, aged 1. They live in Liverpool. Until now, both have been able to continue with their full-time jobs, because Sam’s mother, Emily, could look after both children during the day. (Because both Pat and Sam are in paid employment, Cassandra is entitled to 30 hours of free childcare during term time which she was using).

However, Emily’s health has rapidly but temporarily deteriorated and she needs care herself for the time being so she’s no longer able to provide it for her grandchildren when needed. Pat and Sam are weighing up options as they have secured a nursery place for Clairvoyance either part-time or full-time should they choose to use it.

2.1  Briefly explain two factors that could disproportionately affect Sam’s lifetime financial well-being if she were to give up her full-time job to look after the children until they are in school.