The following information is given for a stock. Investors assume that the return of the stock is best explained by a two-factor model that includes the market factor and a second risk factor. Using a dividend discount model, what is the price for this stock?

Stock covariance with the market= 0.5

Market variance = 0.25

Stock covariance with a second risk factor= 0.6

variance of the second factor= 0.3

Market Premium:3%

Second factor risk premium=1%

Risk free rate =2 %

Current earnings per share= $5,

The ROE is expected to shrink (decrease) at the rate 10% for first 5 years

The ROE is expected to grow at the rate 8% forever after the first 5 years

Payout for the first 5 years: 50%

Payout after 5 years: 50%

a. Suppose that the annual interest rate is 1% and no dividend will be declared for the index constituent stocks in the coming quarter. The index is currently standing at 25,500.

i. Compute the index futures deliverable in exact 3 months.

ii. Suppose now the dividend yield of the index constituent stocks is 0.3% rather than 0%. Without doing any calculation, explain whether the index futures price is higher or lower than your answer in part (i).

b. A silver futures contract requires the seller to deliver 5,000 Troy ounces of silver. Henry sells four July silver futures contract at a price of $16 per ounce. The initial margin is $6,000 per contract and the maintenance margin is $2,500 per contract. What is the futures price per ounce at which Henry would receive a margin call?

A biotech manufacturing company can make test kits at a cost of $ 20.00. Each “kit” for which there is a glove demand the week it is manufactured can be sold for $ 100.00. However, due to the short life of its components, each “kit” that cannot be sold during that week has to be discarded at a cost of $ 5.00

The weekly demand for that product is a random variable with the following pmf

a) Calculate the expected value of the demand for “kits” during one week

b) Calculate the variance of demand for a week

c) The company could manufacture 50 “kits” per shift. If they decide to go into business, how many shifts must they work (1, 2, or 3) to maximize the expected profit?

Assume you are given two resistors with resistances R1=4.0 kΩ and R2=6.0 kΩ and two capacitors with capacitances C1=4.0 µF and C2=6.0 µF.

a) Calculate the equivalent resistances Req and the equivalent capacitance Ceq if the resistors are connected in series and the capacitors are connected in parallel.

b) Now, use the Req and Ceq that you calculate in part (a) to construct an RC circuit. If an emf of 27 V is suddenly applied across Req and Ceq, calculate the current through the Req after t = 12 µs.

c) If the resistor R1 is made of iron wire with radius R= 3 mm, calculate the length of this wire. The resistivity of iron is ρiron= 9.68x10-8 Ω.m.

d) If the capacitance C2 has square parallel-plates with the separation of 0.3 mm, calculate the plate area A.

FINANCIAL ANALYSIS

Consider the following statistics (calculated based on simple ratios with only same year data and no averaging or past year data) to answer the questions:

Total Asset = $100,000, Working Capital ratio = 1.5:1, ROE = 22%, Gross Profit Margin = 15%, Quick ratio = 0.3:1, Cost of Goods Sold = $10,000; All other expenses = $5000

A) By showing working, state what is ROA?

B) By showing working state what is the debt ratio?

C) What is the net worth of the business?

D) By showing working, what is return on sales?

Comment on the following:

i) Profitability status

ii) Liquidity Status

iii) Inventory levels

iv) Current assets excluding inventory

v) Likely cash position

The following information is given for a stock. Investors assume that the return of the stock is best explained by a two-factor model that includes the market factor and a second risk factor. Using a dividend discount model, what is the price for this stock?

Stock covariance with the market= 0.5

Market variance = 0.25

Stock covariance with a second risk factor= 0.6

Variance of the second factor= 0.3

Market Premium:3%

Second factor risk premium=1%

Risk free rate =2 %

Current earnings per share= $5,

The ROE is expected to shrink (decrease) at the rate 10% for first 5 years

The ROE is expected to grow at the rate 8% forever after the first 5 years

Payout for the first 5 years: 50%

Payout after 5 years: 50%

1. The following information is given for a stock. Investors assume that the return of the stock is best explained by a two-factor model that includes the market factor and a second risk factor. Using a dividend discount model, what is the price for this stock?

Stock covariance with the market= 0.5

Market variance = 0.25

Stock covariance with a second risk factor= 0.6

Variance of the second factor= 0.3

Market Premium:3%

Second factor risk premium=1%

Risk free rate =2 %

Current earnings per share= $5,

The ROE is expected to shrink (decrease) at the rate 10% for first 5 years

The ROE is expected to grow at the rate 8% forever after the first 5 years

Payout for the first 5 years: 50%

Payout after 5 years: 50%

1. The output of an economy is characterized by a Cobb-Douglas production function with constant return to scale and an output elasticity with respect to capital equal to 0.3. Also given are the following parameters: 30% saving rate, 5% depreciation rate, 2% population growth rate, and the technology factor is 2.

a). Find the capital-labour ratio, and also the output, consumption and investment on a per capita basis in the steady state equilibrium.

b). Is a government policy that raises the saving rate to 40% socially desirable? Explain your answer with reference to a comparison of this new steady state equilibrium and the initial steady state equilibrium in a) above.

c). If the initial capital-labour ratio is 30, is the economy operating efficiently in the sense that welfare cannot be improved? Explain concisely. What if the initial capital-labour ratio is 15? Again explain concisely.

The following information is given for a stock. Investors assume that the return of the stock is best explained by a two-factor model that includes the market factor and a second risk factor. Using a dividend discount model, what is the price for this stock?

Stock covariance with the market= 0.5

Market variance = 0.25

Stock covariance with a second risk factor= 0.6

Variance of the second factor= 0.3

Market Premium:3%

Second factor risk premium=1%

Risk free rate =2 %

Current earnings per share= $5,

The ROE is expected to shrink (decrease) at the rate 10% for first 5 years

The ROE is expected to grow at the rate 8% forever after the first 5 years

Payout for the first 5 years: 50%

Payout after 5 years: 50%

Jessica has a margin account in which she deposits $300,000 (Equity). Assume that the initial margin requirement is 50% and that the margin maintenance is 15%. Jessica is planning to invest (long) in Ford stock which is currently selling at $40/share. a) Show that Jessica could purchase 15,000 shares, using the maximum allowable margin. b) Assume that the broker charges 5% annual interest rate, assume that the broker's fees are 0.3% of the total amount paid for the purchase and received upon the sale. A year later Jessica receives $1 per share dividend and sells the stock for $45/share. What is the rate of return on her investment? c) Will Jessica receive a margin call if the price of the Ford stock falls during the year to 19$/share? Justify