The 10-year bond yield issued by the Singapore Government has been increasing consistently over the last three years, from 0.84% in 2020, to 1.67% in 2021 and 3.09% in 2022. a) Examine the implications of the expected return on stocks using the capital asset pricing model in the current economic environment. Your answer should not exceed 200 words The price and dividend information over the last five years relating to Walmart (operating in the discount stores industry) and Shell (operating in the oil and gas industry) are shown below. b) Appraise which stock is less risky if held on its own. Your answer should not exceed 200 words. Year 2018 2019 2020 2021 2022 Year 2018 2019 2020 2021 2022 Stock price at the end of the year Shell 48.37 52.10 32.59 41.86 56.43 Walmart 86.20 112.31 138.62 141.30 140.68 Dividend per share Walmart 2.04 2.08 2.12 2.16 2.20 Shell 1.88 1.88 0.65 0.89 1.04

The 10-year bond yield issued by the Singapore Government has been increasing consistently over the last three years, from 0.84% in 2020, to 1.67% in 2021 and 3.09% in 2022. a) Examine the implications of the expected return on stocks using the capital asset pricing model in the current economic environment. Your answer should not exceed 200 words The price and dividend information over the last five years relating to Walmart (operating in the discount stores industry) and Shell (operating in the oil and gas industry) are shown below. b) Appraise which stock is less risky if held on its own. Your answer should not exceed 200 words. Year 2018 2019 2020 2021 2022 Year 2018 2019 2020 2021 2022 Stock price at the end of the year Shell 48.37 52.10 32.59 41.86 56.43 Walmart 86.20 112.31 138.62 141.30 140.68 Dividend per share Walmart 2.04 2.08 2.12 2.16 2.20 Shell 1.88 1.88 0.65 0.89 1.04

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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An Australian commercial bank is looking to issue $1 billion of bonds into the wholesale funding markets to fund its ever-increasing demand for credit growth which is fuelling yet another house price boom. The bonds will be structured with a fixed-interest coupon priced on current government bond yields and equal to current interest rates of 3.00 per cent per annum, coupons paid half-yearly and a tenor of seven years. The bonds are denominated and priced into $1,000 allotments. a. What amount would the bank have raised once the bond is priced and launched into the capital markets? b. After one year, yields on identical types of securities are now 4.00 per cent per annum. The existing bond now has exactly six years to maturity. What is the value, or price, of the existing bond in the secondary market?
The Bank of England’s Monetary Policy Committee raised interest rates to 3.5 per cent on December 15, 2022 while governor Bailey declaring that “inflation has reached its peak”. What was the immediate impact of this action on financial markets? You have been given £10 million on December 16 to build an optimal portfolio in current market conditions. What would you be investing on, how much on each financial instrument and why? Explain your strategy in detail. Direct and indirect investment are all allowed. No cryptocurrency.
Suppose you are considering two possible investment opportunities: a 12-year Treasury bond and a 7-year, A-rated corporate bond. The current real risk-free rate is 3%, and inflation is expected to be 2% for the next 2 years, 3% for the following 4 years, and 4% thereafter. The maturity risk premium is estimated by this formula: MRP = 0.02(t - 1)%. The liquidity premium (LP) for the corporate bond is estimated to be 0.3%. You may determine the default risk premium (DRP), given the company's bond rating, from the following table. Remember to subtract the bond's LP from the corporate spread given in the table to arrive at the bond's DRP. Corporate Bond Yield Rate Spread = DRP + LP U.S. Treasury 0.83 % — AAA corporate 1.03 0.20 % AA corporate 1.39 0.56 A corporate 1.79 0.96 What yield would you predict for each of these two investments? Round your answers to three decimal places. 12-year Treasury yield: fill in the blank _ % 7-year Corporate yield: fill…
i need the answer quickly
Vijay
An investor expects the Bank of New York Mellon Corp. to increase its dividend by 6% per year for the next 20 years. Investors expect the company to earn $5.00 per share in 2024 (Year 1) and pay a dividend of $1.65. The payout ratio is expected to remain stable at 33%. After receiving the dividend in Year 20, the investor expects to sell the stock for $140. If the investor’s required return is 9%, what is the intrinsic value of the stock?
A corporation’s 10-year bonds are currently yielding a return of 6.05 percent. The expected inflation premium is 1.00 percent annually and the real risk-free rate is expected to be 2.10 percent annually over the next ten years. The liquidity risk premium on the bonds is 0.25 percent. The maturity risk premium is 0.10 percent on 2-year securities and increases by 0.05 percent for each additional year to maturity. Calculate the default risk premium on the 10-year bonds. How would an increase in liquidity affect the nominal interest rate?
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 10 years to maturity, and a coupon rate of 8.2 percent paid annually. If the YTM is 10.2 percent, what is the current bond price in euros?
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 9 years to maturity, and a coupon rate of 8.1 percent paid annually. If the YTM is 10.1 percent, what is the current bond price in euros?
The total market value of the equity of Okefenokee Condos is $12 million, and the total value of its debt is $8 million. The treasurer estimates that the beta of the stock currently is 1.3 and that the expected risk premium on the market is 10%. The Treasury bill rate is 3%, and investors believe that Okefenokee's debt is essentially free of default risk. a. What is the required rate of return on Okefenokee stock? Note: Do not round intermediate calculations. Enter your answer as a whole percent. b. Estimate the WACC assuming a tax rate of 21%. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. Estimate the discount rate for an expansion of the company's present business. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. d. Suppose the company wants to diversify into the manufacture of rose-colored glasses. The beta of optical manufacturers with no debt outstanding is 1.5.…
You are the CFO of a company and the CEO wants you to tell him which evolution we will see in interest rates in the near future (say this year and next year). What do you tell him and why? Should your company issue bonds now?
You follow the equity index HSI using an index fund in Hong Kong. You have signed aninterest rate swap to exchange the capital gains (losses) from your portfolio, against a sequenceof cash flows based on 3-month Libor plus 25 bp. The cash flows are exchanged every 90 days.All cash payments occur in Hong Kong dollars.The notional principal is 1 million.a. Draw the cash flow diagram for the first year.b. Let It be the value of the index at time t. Suppose you have the following data:I0 = 23,850 I1 = 24,000 L0 = 4.5%What is the net amount exchanged at period 1?

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