The Clearwater National Bank is planning to set up a new branch. This new branch is anticipated to generate 5 percent of the total business of the bank after it is opened. The bank also expects the return for this branch to be 15 percent with a standard deviation of 5 percent. Currently the bank has a 10 percent rate of return with a standard deviation of 5 percent. The correlation between the bank's current return and returns on the new branch is expected to be -0.3. What is this bank's expected risk (measured by the standard deviation) after adding this branch?
*please provide work
In: Finance
Selected financial information gathered from the Matador Corporation follows:
|
Year 3 |
Year 2 |
Year 1 |
|
|
Average assets |
$1,007,000 |
$1,094,000 |
$1,184,000 |
|
Average equity |
$215,000 |
$294,000 |
$364,000 |
|
Return on assets |
5.9% |
6.6% |
7.2% |
|
Quick ratio |
0.3 |
0.5 |
0.6 |
|
Sales |
$1,650,000 |
$1,452,000 |
$1,304,000 |
|
Cost of goods sold |
$1,345,000 |
$1,176,000 |
$1,043,000 |
Using only the data presented, which of the following statements is most correct?
A. Leverage has declined.
B. Return on equity has improved.
C. Gross profit margin has improved.
In: Accounting
A project manager is trying to ascertain a discounting rate for the project cash flows that carry the same risk as the core business of the firm. The manager has been told by the finance team at the firm that the current capital structure has a debt to value ratio of 0.3, however, they are targeting a ratio of 0.25 to get a better credit rating. The better credit rating would reduce the cost of debt to 7%. The current return on the firm’s equity is 15% and the current cost of debt is 8%. What is an appropriate discount rate for the project cash flows if the tax rate is 25%?
In: Finance
Credit risk measures using the reduced form model: assume a company has the following values for its debt issue.
Face value of the firm’s debt: K = $1,000
Time to maturity of the debt (tenor): T – t = 1 year (T = maturity)
Default intensity (approx prob of default per year): λ = 0.03
Loss given default: γ = 0.3 (30%)
P(t,T) = 0.95
(a) Calculate the probability that the debt will default over the time to maturity.
(b) Calculate the expected loss.
(c) Calculate the present value of the expected loss.
In: Finance
Government tries to discourage tobacco usage. In order to do
that, they would like to set a higher price for tobacco. Currently,
tobacco is priced $10 in the markets. Market research uncovered
that the current price elasticity of tobacco is 0.3.
a. Given this information, what should be the new price set by the
government so that tobacco consumption would fall by %25?
b. Do you think this policy will be more effective in the long-run?
Support your answer with a graph. Show what you expect to happen to
tobacco consumption in the long-run, compared to the short-run.
In: Economics
The population of Americans age 55 and older as a percentage of the total population is approximated by the function f(t) = 10.72(0.9t + 10)0.3 (0 ≤ t ≤ 20) where t is measured in years, with t = 0 corresponding to the year 2000.† (Round your answers to one decimal place.) At what rate was the percentage of Americans age 55 and older changing at the beginning of 2003? % per year At what rate will the percentage of Americans age 55 and older be changing in 2018? % per year What will be the percentage of the population of Americans age 55 and older in 2018? %
In: Advanced Math
A stock's returns have the following distribution:
| Demand for the Company's Products |
Probability of This Demand Occurring |
Rate of Return If This Demand Occurs |
| Weak | 0.1 | -46% |
| Below average | 0.1 | -13 |
| Average | 0.4 | 14 |
| Above average | 0.3 | 34 |
| Strong | 0.1 | 56 |
| = | 1.0 |
Assume the risk-free rate is 3%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places.
Stock's expected return:____%
Standard deviation:_____%
Coefficient of variation:____
Sharpe ratio:_____
In: Finance
The survey by The Bureau of Labor Statistics American Time, showed that the time a person spends in the United States using a computer for entertainment varies greatly according to age. Individuals aged 75 years and older averaged 0.3 hrs (18 minutes) per day. Those aged 15 to 19 spent 1.0 hrs a day. If these times follow an exponential distribution find the proportion of each group that passes: a) Less than 15 minutes a day using the computer to entertainment b) More than two hours c) Between 30 and 90 minutes
In: Statistics and Probability
Consider the Romer Model (1990). Suppose the productivity parameter in the R&D sector is 0.0002 and the stock of human capital in the economy is 2000, of which 1500 is allocated to the manufacturing of the final goods. In the final goods production sector, output elasticity with respect to labor is 0.3 and output elasticity with respect to human capital is 0.4. Answer the following questions:
a. Find the equilibrium growth rate.
b. Find the equilibrium interest rate.
c. If the current level of technology is 100 and the price of a new design for intermediate good is 1000, find the wage of human capital.
In: Economics
Suppose the prime minister wants an estimate of the proportion of the population who support his current policy on health care. The prime minister wants the estimate to be within 0.03 of the true proportion. Assume a 80% level of confidence. The prime minister's political advisors estimated the proportion supporting the current policy to be 0.3. (Round the intermediate calculation to 2 decimal places. Round the final answer to the nearest whole number.)
a. How large of a sample is required?
b. How large of a sample would be necessary if no estimate were available for the proportion that support current policy?
In: Statistics and Probability