6-2 Journal (1)

Q1)VaR can be defined as the minimal loss of a financial position during a given time period for a given probability. true or fslse  Q2 Stocks tend to move together if they are affected by ________. common economic events events unrelated to the economy idiosyncratic shocks unsystematic risk Q3)Beta can be viewed as a measure of systematic risk TRUE OR FASE

Give typing answer with explanation and conclusion

QUESTION 9 If markets are semi-strong efficient, which of the following situations is most likely to yield abnormal returns? O 1. Following the advice of your stockbroker's newsletter O 2. Identifying a pattern in a company's historical stock price O 3. Obtaining insider information Analysing a company's earning report

1. Intrinsic values and stock prices The intrinsic value of a company's stock, also known as its fundamental value, refers to the stock's true value based on expected future cash flows and the risks involved. The value perceived by stock market investors determines the market price of a stock. A stock trading at a price below its intrinsic value is considered to be undervalued. A stock trading at a price above its intrinsic value is considered to be overvalued. In a state of market equilibrium, the intrinsic value of the stock will be the market price of the stock. An analyst with a leading investment bank tracks the stock of Mandalays Inc. According to her estimations, the value of Mandalays Inc.'s stock should be $115.24 per share, but Mandalays Inc.'s stock is trading at $89.57 per share on the New York Stock Exchange (NYSE). Considering the analyst's expectations, the stock is currently: Undervalued In equilibrium O Overvalued

SCHOOL OF BUSINESS ADMINISTRATION Corporate Financial Management FINC 401 Answer the following questions 1. Consider the following information: Rate of Return if State Occurs Probability of State of Economy State of Economy Stock A Stock B Recession .21 .06 -.21 Normal .58 .09 .08 Вoom .21 .14 .25 a. Calculate the expected return for Stocks A and B. b. Calculate the standard deviation for Stocks A and B. 2. Suppose a stock had an initial price of $74 per share, paid a dividend of $1.65 per share during the year, and had an ending share price of $61. a. Compute the percentage total return. b. What was the dividend yield and the capital gains yield? 3. Suppose you bought a bond with an annual coupon of 6% one year ago for $1,010. The bond sells for $1,025 today. a. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? b. What was your total nominal rate of return on this investment over the past year? 4. Consider the following information:…

Pls correct approach.

If the stock market is at least semistrong efficient then, O A. trading on information that you read in The Wall Street Journal or on the internet is unlikely to allow you to purchase stocks that are significantly underpriced. O B. you are likely to find underpriced and overpriced securities by conducting a thorough analysis of a firm's financial statements. O C. you should be able to determine when to buy or to sell a stock by studying the pattern of its historical prices. O D. you cannot expect to find underpriced or overpriced stocks even if you have inside information.

Which of the following statements is TRUE regarding Stocks? O A. Stocks typically have very predictable future cash flows where bonds do not. O B. You should sell stocks if you expect a bull market in stocks. Oc. Claims of lenders come before those of common stockholders. O D. The limited liability feature of corporate stocks increases the risk for shareholders.

Which of the following (hypothetical) observations would most contradict the proposition that the stock market is weakly efficient? Explain.a. Over 25% of mutual funds outperform the market on average.b. Insiders earn abnormal trading profits.c. Every January, the stock market earns abnormal returns.

5. Evidence that stocks that outperform the market this month also outperform the market next month would tend to disconfirm which form of the efficient capital markets hypothesis? a. the weak form b. the semi-strong form c. the strong form d. the weak and semi-strong forms e. all forms

5. Intrinsic values and stock prices The intrinsic value of a company's stock, also known as its fundamental value, refers to the stock's "true" value based on accurate risk and return data. The value perceived by stock market investors determines the market price of a stock. A stock trading at a price below its intrinsic value is considered to be undervalued. A stock trading at a price above its intrinsic value is considered to be overvalued. Which of the following statements best describes a marginal investor? O A marginal investor thinks that the firm's stock is priced too high, and she would only buy more stock if the price dropped sharply. O A marginal investor would buy more stock if the price fell slightly, would sell stock if the price rose slightly, and would maintain her current holding unless something were to change. O A marginal investor thinks that the firm's stock at the current price is a good deal, and she would buy more stock if she had more money to invest. An…

5. Intrinsic values and stock prices The intrinsic value of a company's stock, also known as its fundamental value, refers to the stock's "true" value based on accurate risk and return data. The value perceived by stock market investors determines the market price of a stock. A stock trading at a price below its intrinsic value is considered to be undervalued. A stock trading at a price above its intrinsic value is considered to be overvalued. Which of the following statements best describes a marginal investor? O A marginal investor would buy more stock if the price fell slightly, would sell stock if the price rose slightly, and would maintain her current holding unless something were to change. A marginal investor thinks that the firm's stock is priced too high, and she would only buy more stock if the price dropped sharply. A marginal investor thinks that the firm's stock at the current price is a good deal, and she would buy more stock if she had more money to invest. An analyst…

Which statement is TRUE regarding the riskiness of money market instruments and capital market instruments? *       Changing economic prospects can cause very large changes in current stock values.   Distant cash flows for stocks can be known with certainty, make them riskier than money market instruments.   Money market instruments have predictable cash flows and mature in one year or less, so they are much more risky.   The prices of long-term capital market instruments are less sensitive to changes in interest rates than prices of short-term instruments.

Question 4   A. Contrast the nominal rate of interest with the real rate of interest. B. Why would “a belief in the segmented markets theory of the term structure” implies “a belief in market inefficiency”. C. Suppose you purchased a stock at the end of 2017 and sold it at the end of 2019. The year-end stock prices are shown below and the stock paid no dividends.   2017 2018 2019 $100 $112 $100 (i). Compute the average annual return according to the arithmetic mean method. (ii). Compute the average annual return according to the geometric mean method. (iii). Compare the results in (i) and (ii), and indicate which is more intuitively appealing in assessing the performance of your investment.   Question 5 A. What does it mean to say that a bond has a value less than one for its relative yield differential? What might account for such a difference? B. Why is the maturity of some bonds ambiguous? C. Assume the following characteristics for a particular bond: Face…

Stock A is expected to return 14 percent in a normal economy and lose 21 percent in a recession. Stock B is expected to return 11 percent in a normal economy and 5 percent in a recession. The probability of the economy being normal is 75 percent with a 25 percent probability of a recession. What is the covariance of these two securities?   A) .007006 B) .005180 C) .006274 D) .003938  (Don't Hand writing in solution) .

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