wsparon mureFinancial analysts have estimated the retums on shares of the Woods Corporation and the overall market portfolo under two economic states nature as follows For Woods the state dependent returns are -0.02 in recession, and0.05 in an economic boom. For the market the state dependent retums are -0.06 in recession, and 0.12 in boom. The analyst estimates that the probability of a recession is 0.50 while the probability of an economic boom le 0.50Compute the covenance between Woods and the market*State your answer in decimal form, working your analysis using at least five decimal places of accuracyCHECK ANSWER

When two stocks are to be determined in relationship with each other then covariance is found. In…

Financial analysts have estimated the retums on shares of the Woods Corporation and the overall market portfolo under two economic states nature as follows For Woods the state dependent retums are -0.02 in recession, and 0.001 economic boom. For the market the state dependent retums are 0.08 in recession, and 0.12 in boom. The analyst estimates that the probability of a recession is 0.50 while the probability of an economic boom is 0.50 Compute the covenance between Woods and the market State your answer in decimal form, working your analysis using at least five decimal places of accuracy CHECK ANSWER

Financial analysts have estimated the retums on shares of the Woods Corporation and the overall market portfolo under two economic states nature as follows For Woods the state dependent retums are -0.02 in recession, and 0.001 economic boom. For the market the state dependent retums are 0.08 in recession, and 0.12 in boom. The analyst estimates that the probability of a recession is 0.50 while the probability of an economic boom is 0.50 Compute the covenance between Woods and the market State your answer in decimal form, working your analysis using at least five decimal places of accuracy CHECK ANSWER

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Assume the firm has a tax rate of 23 percent. c-1. Calculate return on equity (ROE) under each of the three economic scenarios before any debt is Issued. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-2. Calculate the percentage changes in ROE when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-3. Calculate the return on equity (ROE) under each of the three economic scenarios assuming the firm goes through with the recapitalization. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-4. Given the recapitalization, calculate the percentage changes in ROE when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round…
utilities versus Petroleum and natural gas 0.77 versus 1.31 food products (grocery stores)versus Apparel(retailers) 0.68 versus 1.09 Banking (Depository Institutions) versus Financial Trading 0.76 versus 1.09 (Security and commodity Brokers) For each matched pair of industries, use the CAPM to compute the required rate of return on equity capital for the median firm in each industry. Assume that the risk-free rate of return is 4.0% and the market risk premium is 5.0%
Consider a position consisting of a $315,380 investment in Oracle Corporation (ORCL) and a $271,440 investment in NVIDIA Corporation (NVDA). Suppose that the daily volatilities of these two assets are 4.14% and 5.71% respectively and that the coefficient of correlation between their return is 0.6778. With an assumption that it follows the normally distributed returns, the 27-day 99% Value at Risk (VaR) for NVIDIA Corporation (NVDA) is closest to A. $187,355.52. B. $157,830.54. C. $124,900.63. D. $100,900.64.
(i) Solve for the expected rate of return for Celecom Bhd. and Pos Selaju Bhd. shares.
Ef 629.
The expected rate of return on Delaware Shores Inc. shares is based on three possible states of the economy. These states are boom, normal and recession, which have probabilities of occurrence of 20%, 75% and 5% respectively. Which one of the following statements is correct concerning the variance of the returns on this share? a. The variance must decrease if the probability of occurrence for a boom increases. b. The variance will remain constant as long as the sum of the economic probabilities is 100%. c. The variance can be positive, zero or negative, depending on the expected rate of return assigned to each economic state. d. The variance must be positive provided that each state of the economy produces a different expected rate of return.
The rate of return on the common stock of Flowers by Flo is expected to be 14 percent in a boom economy, 8 percent in a normal economy, and only 2 percent in a recessionary economy. The probabilities of these economic states are 10 percent for a boom, 50 percent for a normal economy, and 40 percent for a recession. What is the standard deviation of returns for this investment? Round to the nearset hundredth percent. Answer in the percent format. Do not include % sign in your answer (l.e. If your answer is 4.33%, type 4.33 without a % sign at the end.)
A firm is firanced with market values of $295 million in nsk-free debt and $575 million in equity. The firm's asset beta is 0.93. Assume a risk-free rate of 2.5%, a market risk-premium of 6.2% and a tax rate of 25%. Assume the firm's debt beta is 0. What is the firms after- tax weighted average cost of capital? (answer to the fourth decimal place)

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