QUESTION FIVE (5)a) The daily gain from a portfolio is normally distribute I with mean GHS20,000cad standard deviation GHS 0.6 million. Using Besarket risk requirements,calculate the value at risk for determining mician capitalb) Suppose that the spot price of a non-dividend-paying stock is $50, the 3-monthforward price is $55, the 6-month USS interest rate is 10% per annum. Is therean arbitrage opportunity?

Part (b): Arbitrage Opportunity in Forward PricingGiven:Spot price (S) = $50Forward price (F) =…

Answered: QUESTION FIVE (5) a) The daily gain…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 11P

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Using Table 5.3 as your guide, what is your estimate of the expected annual HPR on the market index stock portfolio if the current risk-free interest rate is 4.4%? (Round your answer to 2 decimal places.)
Finance
Consider the following scenario analysis: Rate of Return Scenario Probability Stocks Bonds Recession 0.2 -4 % 15 % Normal economy 0.7 16 11 Boom 0.1 25 3 Assume a portfolio with weights of 0.60 in stocks and 0.40 in bonds. a. What is the rate of return on the portfolio in each scenario? (Enter your answer as a percent rounded to 1 decimal place.) b. What are the expected rate of return and standard deviation of the portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. Would you prefer to invest in the portfolio, in stocks only, or in bonds only? Explain the benefit of diversification.
Short Question (SQ2) The market index model can be formulated as: Rea+B Rt + Et, (15%) where R denote the annual excess returns of the risky asset and, RM,t is the excess annual return on the market index, S&P 500. There are two risky funds, A and B, and their returns follow the above market index model. The estimations of annual means, annual standard deviations, and the parameters of the index model for Funds A and B and the S&P 500 index are in the table below. Assets Fund A Fund B S&P 500 (M) Risk premium 13% 7% 10% Standard deviation of Market beta (B) returns 40% 20% 20% 1.0 0.5 1.0 An investor wants to invest $10 thousands into funds A and B, and he plans to allocate 70% of his capital into A and the remaining into B. (A) What would be the alpha, beta, and R-squared for his portfolio (the combination of Funds A and B) under the market index model? (6%) (B) If this investor would like to short sell a hedging portfolio, constructed with S&P 500 index portfolio and the risk-free…
QUESTION 18 Suppose that the 1-year, 2-year, 3-year, and 4-year spot rates are observed as follows: r1=9.7%, r2=10.2%, r3=10.9%, r4-12.3%, What must be the expected return in year 4 under the liquidity preference theory if the liquidity premium is 0.49%? Oa. 18.63% Ob. 16.61% c. 16.12% Od. 18.14%
Quantitative Problem: You are holding a portfolio with the following investments and betas: Dollar investment Beta 1.35 1.50 0.85 -0.20 Stock A B с $200,000 100,000 500,000 200,000 Total investment $1,000,000 The market's required return is 11% and the risk-free rate is 4%. What is the portfolio's required return? Do not round intermediate calculations. Round your answer to three decimal places. %
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Question 3 a. According to the Capital Asset Pricing Model, what must be the beta of a portfolio with E[r] = 12%, if rf 3% and E[TM] = 8%? b. The market price of a security is $50. Its expected rate of return is 16%. The risk-free rate is 8%, and the market risk premium is 8.5%. What will be the market price of the security if its covariance with the market portfolio doubles (and all other variables remain unchanged)? Assume that the stock is expected to pay a constant dividend in perpetuity.
Stock Beta Current Price Expected Price Expected Dividend X 0.8 $12.50 $13.10 $0.80 Y 1.1 $ 8.25 $ 9.76 $0.20 Z 2.1 $25.70 $30.04 $0.00 The expected price is in one year. The expected market return is 11.5% and the risk-free rate is 4.5%. According to the Capital Asset Pricing Model what rate of return are the stocks expected to earn Are the three stocks overvalued or undervalued in the market today Given the forecast of price and dividend for stock Z, what is its current fair market price based on the CAPM?
Financial Accounting
Consider the following scenario analysis: Rate of Return Scenario Probability Stocks Bonds Recession 0.2 -5% 17% Normal economy 0.6 18 11 Boom 0.2 24 4 Assume a portfolio with weights of 0.60 in stocks and 0.40 in bonds. a. What is the rate of return on the portfolio in each scenario? (Enter your answer as a percent rounded to 1 decimal place.) b. What are the expected rate of return and standard deviation of the portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Could part 2 be answered

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