Carolina is considering a $500 investment that will pay $750 with a 30% probability, $600 with a 20% probability, and $350 with a 50% probability. Construct a table showing her probabilities and payoffs. Solve for the expected value, standard deviation, and 95% value at risk of her investment option.
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- Terri Allessandro has an opportunity to make any of the following investments: E. The purchase price, the lump-sum future value, and the year of receipt are given below for each investment. Terri can earn a rate of return of 13% on investments similar to those currently under consideration. Evaluate each investment to determine whether it is satisfactory, and make an investment recommendation to Terri. The present value, PV, at 13% required return of the income from Investment A is S . (Round to the nearest cent.) - X Data table Purchase Price Future Value Year of Receipt Investment $8.674 $21,000 $2.000 15 $429 $2.282 $57 11 $10,000 54 $14,000 (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet) Clear all Check answer Heln me BCDSGiven the data in the table and the information below, please answer the following question. Show all working and formulas used. Maturity (T) r(1) r(2) r(3) r(4) r(5) r(6) Spot Rate (%) 0.15 0.22 0.25 0.28 0.20 0.13 Misty would like to invest 10,000. She is faced with the choice between 2 investments: Option 1: invest for 5 years; Option 2: invest for 3 years and reinvest for another 2 years at a forward rate of 0.07% Should she be indifferent between the choices? If not, which one is the optimal option to Misty?A. Given the data in the table and the information below, please answer the following question. Show all working and formulas used. Maturity (T) r(1) r(2) r(3) r(4) r(5) r(6) Spot Rate (%) 0.15 0.22 0.25 0.28 0.20 0.13 Misty would like to invest 10,000. She is faced with the choice between 2 investments: Option 1: invest for 5 years; Option 2: invest for 3 years and reinvest for another 2 years at a forward rate of 0.07% Should she be indifferent between the choices? If not, which one is the optimal option to Misty? B. Sovereign debt (issued bonds) are typically considered as proxies for risk free. Discuss the reasons why sovereign debt may not be risk free. Why might credit ratings agencies give different credit ratings to sovereign debt issued by the same country, depending on coupons denominated in domestic or foreign currency. C. “Four Cs of credit analysis” is used by analysts to…
- Sarah purchases a call of CBA with exercise price $55 and sells a call of CBA with exercise price $50, both call options have the same expiration date. a. Draw the payoff diagram for her strategy as a function of the stock price at expiration. b. Draw the profit/loss diagram for this strategy as a function of the stock price at expiration. (hint: which option has a higher premium?).Suppose an investor, Erik, is offered the investment opportunities described in the table below. Each investment costs $1,000 today and provides a payoff, also described below, one year from now. Option Payoff One Year from Now 1 100% chance of receiving $1,100 2 50% chance of receiving $1,000 50% chance of receiving $1,200 3 50% chance of receiving $200 50% chance of receiving $2,000 If Erik is risk averse, which investment will he prefer? The investor will choose option 1. The investor will choose option 2. The investor will choose option 3. The investor will be indifferent toward these options. In contrast to his brother Erik, Devin is a risk lover (or exhibits risk seeking behavior). Which of the following statements is true about Devin? Everything else remaining constant, Devin will prefer option 3. Everything else remaining constant, Devin will prefer option 2. Everything else remaining constant,…Suppose an Investor, Erik, is offered the Investment opportunities described in the table below. Each Investment costs $1,000 today and provides a payoff, also described below, one year from now. Option Payoff One Year from Now 1 100% chance of receiving $1,100 2 50% chance of receiving $1,000 50% chance of receiving $1,200 3 50% chance of receiving $200 50% chance of receiving $2,000 If Erik is a risk neutral investor, which investment will he prefer? O Erik will be indifferent toward these options. Erik will choose option 1. Erik will choose option 2. Erik will choose option 3. In contrast, Erik's brother, Devin, is risk averse. Which of the following statements is true about Devin? Everything else remaining constant, Devin will prefer option 1. Everything else remaining constant, Devin will prefer option 2. ○ Everything else remaining constant, Devin will prefer option 3. O None of these options is preferred.
- Sulsa invests $9,122.85 at t = 0 and $29,100 at t = 2. In return, she receives %3D $28,223 at t = 1 and $10,000 at t = 3. Write down a time 0 equation of value and verify that it is satisfied for V = 0.95, v = 0.97, and v = 0.99. Find the corresponding three yield rates. (Round your answers to two decimal places.) v = 0.95 % v = 0.97 v = 0.99 %Terri Allessandro has an opportunity to make any of the following investments: The purchase price, the lump-sum future value, and the year of receipt are given below for each investment. Terri can earn a rate of return of 6% on investments similar to those currently under consideration. Evaluate each investment to determine whether it is satisfactory, and make an investment recommendation to Terri. The present value, PV Data table Investment A Purchase Price Future Value Year of Receipt $20,032 $28,000 5 B $402 $1,000 21 с $3,266 $7,000 11 D $4,173 $20,000 46 (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Print Done ×Your broker has offered you an investment opportunity at a cost of $ 500. The opportunity offers $100 in 1 year, $200 in 2 years, and $300 in 3 years. If you require a 10% return on investments of similar risk, should you take the opportunity?
- You have been offered an investment in Brian, Jesse, and Lisa. Each investment pays $1,000 at the end of 3 years and $80 at the end of the next 3 years. Based on risk, Brian's investment demands a 12% rate on return, Jesse's and 8% return, and Lisa's 6% rate of return. Determine the value of each investment.You are thinking about buying a real estate property. If you buy the property, you think you will sell it for $829826 in 13 years. If your required return on investments of this risk is 16.17%, what is the most that you should be willing to pay for the property? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate.Consider a put option on a stock that currently sells for £100, but may rise to £120 or fall to £80 after 1 year. The risk free rate of return is 10%, and the exercise price is £90. (a) Calculate the value of the put option using the risk-neutral valuation relationship (RNVR). Explain the reasoning behind your calculations.
