The probability distribution of the returns of two assets, A and B, are shown in the tablebelow. Calculate the covariance between the returns of asset A and asset B.State of EconomyProbability of StateReturn of Asset AReturn of Asset BBoom0.2040%5%Normal0.4520%10%Slow Down0.250%15%Recession0.10-20%30%O-0.3750-0.01140.3750-50.2500-2.525

The combined variability of two variables is described by covariance. When there is a positive…

Answered: The probability distribution of the…

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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refer to below table ,Conduct a sensitivity analysis to determine the sensitivity of NPV to changes in the sales price, number of units sold, the variable costs per unit, fixed costs and the cost of capital. Set these variables’ values at 10% above and 10% below their base-case values. 2. Include a graph in your analysis with below table? 10% above Year Net Cash Flow (RM) Discount Rate (13.20%) Present Value (RM) 0 -1,217,800.00 1 -1217800 1 328,750.00 0.883392 290415.19 2 337,330.00 0.780382 263246.2 3 346,423.15 0.689383 238818.31 4 355,195.10 0.608996 216312.32 5 614,461.20 0.537982 330569.16 NPV 121561.19 10% below Year Net Cash Flow (RM) Discount Rate (10.80%) Present Value (RM) 0 -1,145,800.00 1 -1145800 1 184,000.00 0.902527 166064.98 2 185,395.00 0.814555 151014.45 3 189,459.85 0.735158 139282.93 4 193,936.89 0.6635 128677.14 5 448,143.25 0.598827 268360.17…
14. Consider the following possible returns over the next year on an asset Return probability -£40 0.5 £40 0.5 What is the variance of return of the asset.
) Assuming a 9% cost of capital, find the modified internal rate of return for the following cash flows: a. 19.78% b. 6.95% c. 13.64% d. 7.86% Year Cash Flow 0 1 2 3 -$175 $167 $240 -$120
Consider two assets with the following cash flow streams: Asset A generates $4 at t=1, $3 at t=2, and $10 at t=3. Asset B generates $2 at t=1, $X at t=2, and $10 at t=3. Suppose X=6 and the interest rate r is constant. For r=0.1, calculate the present value of the two assets. Determine the set of all interest rates {r} such that asset A is more valuable than asset Draw the present value of the assets as a function of the interest rate. Suppose r=0.2. Find the value X such that the present value of asset B is 12. Suppose the (one-period) interest rates are variable and given as follows: r01=0.1,r12=0.2, r23=0.3. Calculate the yield to maturity of asset A. (You can use Excel or ascientific calculator to find the solution numerically.)
If the profit margin is 0.1142, asset turnover is 0.5619 and financial leverage is 1.2937, what is the return on asset? Multiple Choice 0.1142 0.7269 0.0830 0.0642
Take me to the text The following table indicates the net cash flows of a capital asset: Year Net Cash Flow 0 $-13,900 1 $5,500 2 $9,600 Do not enter dollar signs or commas in the input boxes. Use the negative sign where appropriate. Round the factor to 4 decimal places and the NPV to the nearest whole number. Assume the required rate of return is 13%. Determine the net present value of this asset. Year Net Cash Flow 0 1 2 Total $-13,900 $5,500 $9,600 Factor Net Present Value SA $ A
Consider the following information: State of Economy Probability of State of Rate of Return if State Recession Normal Boom Economy .11 .35 .54 Calculate the expected return. Multiple Choice 20.82% 21.86% О 2.53% Occurs -.06 .12 .32
Consider the following information: Probability of Rate of Return If State of Economy State of Economy State Occurs Recession Normal Boom .20 .45 .35 Expected return Calculate the expected return. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. -.14 .10 .36 %
Please correct answer and don't use hend raiting
Consider the following information: Rate of Return. If State Occurs State of Economy Recession Normal Boom Probability of State of Economy 24 45 .31 -.09 11 30 Calculate the expected return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return %
Fundamentals of Engineering Economy Consider the cash flow transactions depicted in the accompanying cash flowdiagram, with the changing interest rates specified. What is the equivalent presentworth?
Consider the case of two financial assets and three market conditions (states). The tablebelow gives the respective probability for each market condition and the return of each assetin each one of them. Market Conditions State Recession Normal Expansion Probability of state 30% 40% 30% Return of asset A -30% 20% 55% Return of asset B -10% 70% 0% Consider the portfolio with 50% investment in each of the two assets above. Calculatethe expected return and the standard deviation of the portfolio.

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