Varma Investment Services must develop an investment portfolio for a new client. As an initial investment strategy, the new client would like to restrict the portfolio to a mix of two stocks: Stock Price/Share Estimated Annual Return (%) AGA Products $ 50 6 Key Energy 100 10 The client wants to invest $50,000 and established the following two investment goals. LO 1, 2
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Varma Investment Services must develop an investment portfolio for a new client. As an initial investment strategy, the new client would like to restrict the portfolio to a mix of two stocks:
Stock
Price/Share
Estimated Annual Return (%)
AGA Products
$ 50
6
Key Energy
100
10
The client wants to invest $50,000 and established the following two investment goals. LO 1, 2
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- Fred has been told that diversifying his investments will significantly reduce risk. He hastherefore invested in two stocks. His portfolio consists of a $1 500 000 investment in DrugsLimited and $750 000 invested in shares of Pharmaceuticals Limited.Economy Probability ReturnsDrugs Limited PharmaceuticalsLimitedBoom 0.4 12% 19%Normal 0.5 8% 11%Recession 0.1 2% -4% i. What is the expected return on Fred’s portfolio? ii. Advise Huron as to the effectiveness of his diversification strategy.Consider an investment project with the following cash flows: N Cash Flow 0 -$5,0001 $02 $4,8403 $1,331ComputcthelRRforthisinvestment.lsthisprojectacceptablcatMARR = 10%?Pls help ASAP for both
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- Current Asset Usage Policy Payne Products had $2.4 million in sales revenues in the most recent year and expects sales growth to be 25% this year. Payne would like to determine the effect of various current assets policies on its financial performance. Payne has $3 million of fixed assets and intends to keep its debt ratio at its historical level of 50%. Payne's debt interest rate is currently 9%. You are to evaluate three different current asset policies: (1) a restricted policy in which current assets are 45% of projected sales, (2) a moderate policy with 50% of sales tied up in current assets, and (3) a relaxed policy requiring current assets of 60% of sales. Earnings before interest and taxes are expected to be 11% of sales. Payne's tax rate is 35%. What is the expected return on equity under each current asset level? Round your answers to two decimal places. Tight policy % Moderate policy % Relaxed policy %9.3 Consider another set of net cash flows: Year Cash Flow ($) 0 2,000 1 2,000 2 0 3 1,500 4 2,500 5 4,000 What is the net present value of the stream if the opportunity cost of capital is 10 percent? What is the value of the stream at the end of year 5 if the cash flows are invested in an account that pays 10 percent annually? What cash flow today (time 0), in lieu of the $2,000 cash flow, would be needed to accumulate $20,000 at the end of year 5? (Assume that the cash flows for years 1 through 5 remain the same.)1. If today stock is trading for $60 a share. You are confident that the stock price will experience a change in the value of over 30% relative to the current price in either upward or downward direction over the course of next year. Today you decide to transact in either one or two stocks maturing in one year. The strike price of both options is $60 a share. The call option premium is $6 and put option premium is $5. Given this information and your belief, you should _______. a. buy 2 calls b. buy 1 call and sell 1 put c. sell 1 call and 1 sell put d. buy 1 call and buy 1 put e. sell 2 puts Please explain