1.Ur CEO believes that economy will go to a recession. Which of the following benchmarks will he choose to implement for his bearish view ? 50 Treasury 50 HY 100% HY 30 Treasury 40 equity 30 HY NONE OF THE ABOVE
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1.Ur CEO believes that economy will go to a recession. Which of the following benchmarks will he choose to implement for his bearish view ?
|
50 Treasury 50 HY |
||
|
100% HY |
||
|
30 Treasury 40 equity 30 HY |
||
|
NONE OF THE ABOVE |
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- Suppose financial analysts believe that there are four equally likely states of the economy: depression, recession, normal, and boom. The returns on the Supertech Company are expected to follow the economy closely, while the returns on the Slowpoke Company are not. The return predictions are as follows: States of the economy Depression -20% 5% Recession 10% 20% Normal 30% -12% Boom 50% 9% •Required: 1.For each company calculate: i.the expected returns ii.the Variance iii.the Standard deviation 2.For each company calculate and explain: i.The covariance ii.The correlation 3.Assuming you are an investor with GHS100 available. If you invest GHS60 and GHS40 in Allos Inc. and Orangus Inc. respectively, what will be your portfolio returns? 4.Calculate the Standard deviation of the portfolio.Which of the following is a diversifiable risk? Multiple Choice The risk that the economy will go into a recession The price of oil rising The risk that a company's CEO is killed in a plane crash Inflation The corporate tax rate rising by 5%•Question 1 Suppose financial analysts believe that there are four equally likely states of the economy: depression, recession, normal, and boom. The returns on the Supertech Company are expected to follow the economy closely, while the returns on the Slowpoke Company are not. The return predictions are as follows: States of the economy Allos Inc. Returns (RA) Orangus Inc.Returns (Rg) snäur Depression -20% Recession 20% %10% Normal -12% %6 Required: 1. For each company calculate: i. the expected returns ii. the Variance 2. Assuming you are an investor with GHS100 available. If you invest GHS60 and GHS40 in Allos Inc. and Orangus Inc. respectively, jii. the Standard deviation what will be your portfolio returns? 3. Calculate the Standard deviation of the portfolio.
- Suppose financial analysts believe that there are four equally likely states of the economy: depression, recession, normal, and boom. The returns on the Supertech Company are expected to follow the economy closely, while the returns on the Slowpoke Company are not. The return predictions are as follows: States of the economy Allos Inc. Returns (RA) Orange Inc. Returns (RB) Depression -20% 5% Recession 10% 20% Normal 30% -12% Boom 50% 9% Required: 1.For each company calculate: i.the expected returns ii.the Variance iii.the Standard deviation 2.For each company calculate and explain: i.The covariance ii.The correlation 3.Assuming you are an investor with GHS100 available. If you invest GHS60 and GHS40 in Allos Inc. and Orangus Inc. respectively, what will be your portfolio returns? 4.Calculate the Standard deviation of the portfolio.QUESTION 7 Which of the following companies will probably have the highest decline in profit if the economy goes into recession? O A company with a DOL = 5.7 A company with a DOL = 2.5 A compnay with a DOL = 5.8 A company with a DOL = 5.5If the probability of a recession is 0.3, normal growth is 0.4 and a boom is 0.3, and the payoff in the event of a recession is $100, normal growth is $300 and boom is $500, what is the expected payoff? a. $300 b. $400 c. $200 d. $500
- What is the value of Ls stock for volatilities between 0.20 and 0.95? What incentives might the manager of L have if she understands this relationship? What might debtholders do in response?Q41 Which one of the following is not an assumption of the Walter’s relevance theory model? a. Earnings and Dividends are do not change while determining the value b. The firm finances through external sources c. The firm has infinite life d. The firm’s rate of return and its cost of capital are constantSuppose you believe that the economy is just entering a recession. Your firm must raisecapital immediately, and debt will be used. Should you borrow on a long-term or a shorttermbasis? Why?
- 32. Choose the characteristics of the recession phase. (Check all that apply) Unemployment begins to rise Businesses lower production of goods and services Profits are high GDP growth slows for two or more quarters The economy slows down3. What do you think about the interest rate i for an economy, which suffers a long period of pandemic and economic recession? Framework". Please analyze this issue with "Liquidity PreferenceSuppose that as the economy moves through a business cycle, risk premiums also change. For example, in a recession, when people are concerned about their jobs, risk tolerance might be lower and risk premiums might be higher. In a booming economy, tolerance for risk might be higher and premiums lower.a. Would a predictably shifting risk premium such as described here be a violation of the efficient market hypothesis?b. How might a cycle of increasing and decreasing risk premiums create an appearance that stock prices “overreact,” first falling excessively and then seeming to recover?