Diversification in an investment portfolio is a significant concept for creating the highest return for the least amount of risk. To create this diversification portfolio managers consider the correlation of investments. Based on your reading, thoroughly explain how correlation is interpreted and how it can help with the creation of a diversified portfolio.

a.Owners' equity 2017

Owners' equity 2018

b.Change in NW

Cc-1.Fixed assets sold

c-2.Cash flow from assets

d-1.Debt retired

d-2.Cash flow to creditors

(show all workings 60 marks)

This question relates to material covered in Topics 1-5. This question addresses the 1st, 2nd and 3rd subject learning outcomes.

(a) Bradley hates taking risk with his money; "I hate shares and property, I know a lot of people who have lost money in those investments". As a result he will only consider bank guaranteed investments. Bank guaranteed investments are returning 1%. Bradley has a marginal tax rate of 32.5% and pays medicare levy of 2%.

1. Assuming he pays tax at 32.5% plus medicare levy, on the income from his investment, is he preserving the real dollar value of his investment if inflation is 2.5% per annum? Show your workings to justify your answer. (2.5 marks)
2. When considering your calculations, how would you explain the benefits of risk to Bradley? (2.5 marks)

You own a coal mining company and are considering opening a new mine. The mine itself will cost $ 118.1 million to open. If this money is spent​ immediately, the mine will generate $ 21.3 million for the next 10 years. After​ that, the coal will run out and the site must be cleaned and maintained at environmental standards. The cleaning and maintenance are expected to cost $ 1.7 million per year in perpetuity. What does the IRR rule say about whether you should accept this​ opportunity? If the cost of capital is 8.3 %​, what does the NPV rule​ say?

I have bolded the answers I chose. I just need someone to check my work and if I'm wrong possibly explain why, please?

1. If a stock pays a dividend, the owner of a call option will see the value of their option decrease by the amount of that dividend payment.

a. true

b. false

2. DEF stock currently trades for $40. Both American calls and puts are available on the stock. All else being constant, which of the following will occur if the stock price falls to $35?

a. Both the call and put premium will increase.

b. The call premium will increase while the put premium will decrease.

c. Both the call and put premium will decrease.

d. None of the above.

3. PQU stock has two series of European call options. Both series expire in six months, but one series has a strike price of $50, while the other series has an exercise price of $60. If the market is in equilibrium, it must case that the $50 series has a higher premium than the $60 series on any given day prior to expiration.

a. true

b. false

4. A 9-month American call on Smith stock with an exercise price of $20 sells for $1.25. A 9-month European call on Smith stock carries a strike price and premium of $22 and $1.1, respectively. If the American call isn't exercised early, which of the following will occur when the options expire?

a. The American call will have a higher premium than the European call.

b. The American call will have a lower premium than the European call.

c. The premiums for both options will be the same.

d. Cannot be determined.

You are considering making a movie. The movie is expected to cost $ 10.7 million up front and take a year to make. After​ that, it is expected to make $ 4.5 million in the year it is released and $ 2.1 million for the following four years. What is the payback period of this​ investment? If you require a payback period of two​ years, will you make the​ movie? Does the movie have positive NPV if the cost of capital is 10.9 %​?

The purpose of this assignment is to allow the student an opportunity to explain what it means to have an efficient capital market. Students will gain an understanding of the different levels of market efficiency and how behavioral finance can inhibit reaching market transparency.

Explain in 525 words what it means to have efficient capital market, including:

• Describe the behavioral challenges in achieving efficiency.
• Discuss the three forms of market efficiency.
• What are the implications to corporate finance?
• Would you consider the real estate market an efficient capital market? Please explain why or why not.

If investing in calls or puts is higher risk than investing in the actual stocks, why would anyone ever want to buy those things?

You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of $ 9.6 million. Investment A will generate $ 2.06 million per year​ (starting at the end of the first​ year) in perpetuity. Investment B will generate $ 1.48 million at the end of the first​ year, and its revenues will grow at 2.2 % per year for every year after that. a. Which investment has the higher IRR​? b. Which investment has the higher NPV when the cost of capital is 5.8 %​? c. In this​ case, when does picking the higher IRR give the correct answer as to which investment is the best​ opportunity?

Suppose that the price of the same basket of goods at time 0 is PC0= 100 in country C and PD0= 90 in country D, so that the exchange rate is SCD0=10090. Inflation rates are expected to be 10% in country C and 21% in country D, over the foreseeable future.  

a) Does PP approximately predict an appreciation or depreciation of currency C?

b) What are the expected price levels in the two countries (i.e., PC1 and PD1 ) and the expected no-arbitrage exchange rate in one period (i.e., SC1 )? (Use the exact
form).

d) What is the expected no-arbitrage exchange rate two-years into the future?

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 5%. 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.)

Margaret is engaged in a research project which involves 1,000 listed companies. Her research is based on a hypothesis that there is no significant difference between the discretionary accruals of large and small companies. Margaret hopes her research will provide insight to the practices of all companies around the world

a. State whether Margaret is using a naturalistic or scientific approach

b. Using the information provided, briefly outline at least 3 reasons to support your answer

analyse and explain Walt Disney company stock price in june

The trustees of a pension fund would like to examine the issue of protecting the bonds

in the fund’s portfolio against an increase in interest rates using options and futures.

Before discussing this with their external bond fund manager, they decide to ask four

consultants about their recommendations as to what should be done at this time. It turns

out that each of them has a different recommendation. Consultant A suggests selling

covered calls, Consultant B suggests doing nothing at all, Consultant C suggests selling

interest rate futures, and Consultant D suggests buying puts. The reason for their different

recommendations is that although all consultants understand the pension fund’s objective

of minimizing risk, they differ with one another in regards to their outlook on future

interest rates. One of the consultants believes interest rates are headed downward, one has

no opinion, one believes that the interest rates would not change much in either direction,

and one believes that the interest rates are headed upward. Based on the consultants’

recommendations, could you identify the outlook of each consultant?