Suppose over the last decade the volatility of USD/CAD (USA dollar/Canadian dollar) kept decreasing, what would have happened to its bid-ask spread? Explain your answer with reasoning.
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Suppose over the last decade the volatility of USD/CAD (USA dollar/Canadian dollar) kept decreasing, what would have happened to its bid-ask spread? Explain your answer with reasoning.
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- Which of the following investments will experience the largest change in its market value as a result of changes in the level of interest rates (we are talking about the absolute value of the change, up or down)? Suppose interest rates go up or down by 50 basis points (0.5%). Rank the investments from 1 to 4 where a 1 is the most affected (largest absolute change in value) while a 4 is the least affected (smallest absolute change in value). A: $1 million invested in 3-month Treasury bills. 请选择~ B: $1 million invested in STRIPS (zero coupons) maturing in three years. |请选择 C: $1 million invested in a Treasury note maturing in three years. The note pays a 5% annual coupon. |请选择︾ D: $1 million invested in a Treasury note maturing in three years. The note pays a 10.0% annual coupon. |请选择“Value-weighted index could provide a better signal on the market condition to the investors as compared to price-valued index.” Do you agree with this statement? Why?(Capital Asset Pricing Model) Breckenridge, Inc., has a beta of 0.79. If the expected market return is 10.0 percent and the risk-free rate is 6.0 percent, what is the appropriate expected return of Breckenridge (using the CAPM)? The appropriate expected return of Breckenridge is %. (Round to two decimal places.)
- Use the following output from a market model regression of the weekly percentage returns on the AIG commodities index on a market index to answer questions a. - f. a. What is the formula for the Commodities Index' characteristic line? b. You forecast a market return of 1.0% for next week. What is next week's expected return for the commodities index? c. What is the correlation between the return on the commodities index and the return on the market Index? d. How much of the variation in the commodities index's returns are explained by the model? e. Based on these regression results, the commodities index would be considered what kind of an investment? f. Does this regression have much explanatory power? Why or why not?Suppose TRF = 4%, TM = 9%, and b = 1.1. a. What is n, the required rate of return on Stock i? Round your answer to one decimal place. % b. 1. Now suppose rar increases to 5%. The slope of the SML remains constant. How would this affect ry and n? I. ry will increase by 1 percentage point and n will remain the same. II. Both ry and r, will decrease by 1 percentage point. III. Both rm and r, will remain the same.. IV. Both r and r, will increase by 1 percentage point. V. r will remain the same and r, will increase by 1 percentage point. -Select- v 2. Now suppose rar decreases to 3%. The slope of the SML remains constant. How would this affect ry and n? I. TM will decrease by 1 percentage point and n will remain the same. II. rs will remain the same and n will decrease by 1 percentage point. III. Both ry and r, will increase by 1 percentage point. IV. Both ry and r, will remain the same. V. Both ry and r, will decrease by 1 percentage point. SelectNone
- Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Boom Bust .66 .34 Stock A .09 .23 Stock B .03 Stock C .34 .29 -.14 a. What is the expected return on an equally weighted portfolio of these three stocks? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the variance of a portfolio invested 21 percent each in A and B and 58 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161. a. Expected return b. Variance of portfolio 14.43 %Please show how to solve this Consider the REIT valuation spreadsheet presented in class. For each of the following scenarios, and all other things equal, determine whether each scenario will increase, decrease or won’t affect the probability that new investors will achieve their levered required rate of return. a. A distribution is defined for NOI growth rate, where the average value remains the same, but the right “tail” of the distribution is longer than the left “tail”. b. The quality adjustment value is lower.c. The risk premium is lower.d. The current market cap is higher.e. The price of the REIT is lower.f. The projected 10-year treasury rate is higher.Suppose rRF = 4%, rM = 11%, and bi = 1.6. A. What is ri, the required rate of return on Stock i? Round your answer to one decimal place. % B. 1. Now suppose rRF increases to 5%. The slope of the SML remains constant. How would this affect rM and ri? Both rM and ri will decrease by 1 percentage point. Both rM and ri will remain the same. Both rM and ri will increase by 1 percentage point. rM will remain the same and ri will increase by 1 percentage point. rM will increase by 1 percentage point and ri will remain the same. C. Now suppose rRF decreases to 3%. The slope of the SML remains constant. How would this affect rM and ri? Both rM and ri will remain the same. Both rM and ri will decrease by 1 percentage point. rM will decrease by 1 percentage point and ri will remain the same. rM will remain the same and ri will decrease by 1 percentage point. Both rM and ri will increase by 1 percentage point. D. 1. Now assume that rRF remains at 4%, but rM increases to 12%.…
- Under the Black-Scholes framework, consider So = 40, o = 30%, r = 8%, 80% and T=0.5. (a) Find Delta A, Gamma I' for a 45-strike European call. (b) Find the Vega of for the 45-strike call. For a 0.01 increase in volatility, what is the price (value) change in the call?Suppose rRF = 6%, rM = 10%, and bi = 1.8. What is ri, the required rate of return on Stock i? Round your answer to one decimal place. % 1. Now suppose rRF increases to 7%. The slope of the SML remains constant. How would this affect rM and ri? Both rM and ri will remain the same. Both rM and ri will increase by 1 percentage point. rM will remain the same and ri will increase by 1 percentage point. rM will increase by 1 percentage point and ri will remain the same. Both rM and ri will decrease by 1 percentage point. 2. Now suppose rRF decreases to 5%. The slope of the SML remains constant. How would this affect rM and ri? Both rM and ri will remain the same. Both rM and ri will decrease by 1 percentage point. rM will decrease by 1 percentage point and ri will remain the same. rM will remain the same and ri will decrease by 1 percentage point. Both rM and ri will increase by 1 percentage point. 1. Now assume that rRF remains at 6%, but rM increases to 11%.…Which of the following statements is most correct? Why?* a. If a market is weak-form efficient, this means that prices rapidly reflect all available public information. b. If a market is weak-form efficient, this means that you can expect to beat the market by using technical analysis that relies on the charting of past prices. c. If a market is strong-form efficient, this means that all stocks should have the same expected return. d. All of the statements above are correct. c. None of the statements above is correct.
