Register Consider the following scenario analysis: Rate of ReturnScenarioProbabilityStocksBondsRecession0.2-7%Normal economy0.716 7 Boom0.125 6 Assume a portfolio with weights of 0.60 in Assignment Help Consider the following scenario analysis: Rate of ReturnScenarioProbabilityStocksBondsRecession0.2-7%Normal economy0.716 7 Boom0.125 6 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.If you invest $5000 in a certificate of deposit that matures after ten years and pays 5% interest, which is
If you invest $5000 in a certificate of deposit that matures after ten years and pays 5% interest, which is compounded annually until the CD matures.How much interest will you earn if the interest left to accumulate? How much interest will you earn if the interest is withdrawn every year? Though the real estate market has been depressed in some countries due to the aftermath of the global financial crisis,
Though the real estate market has been depressed in some countries due to the aftermath of the global financial crisis, the markets in a few countries or cities have kept their robust growth in prices and expansions.
A noteworthy case is the commercial and residential properties in Copenhagen, Denmark.To tap into the above market, you have already entered into a sizeable investment in a commercial property.The currency of Denmark is Danish Kroner, or Krone, and we use DKK for it hereon.In brief, you have made arrangements for the purchase of a commercial property in Copenhagen for DKK 210.00 million.
The functional currency of your company is the US dollar.Through the help and guidance of your real estate agent, lots of detailed arrangements, including signing of the contract, computing the closing costs, funding the purchase, etc., have already been taken care of.The only remaining item that is the subject of this inquiry is a lump sum payment of DKK 11,800,000.00 upon the occupancy (delivery) of the property, which is scheduled for nine months from today.Considering the variations in the currency market these days, you are very concerned that your expected payment of DKK 11,800,000.00 may impose unnecessary foreign exchange risk for your company.
You are considering several hedging alternatives to reduce the exchange rate risk arising from this purchase.You evaluate your position in USD at all times.The following information is made available to you today: The spot exchange rate is DKK 6.8911/$ The nine month forward rate is DKK 6.9866/$ Forecast of the management for the end of the ninth month is DKK 7.10/$ The company’s cost of capital is 10 percent per year.The Danish 9-month borrowing or lending rate is 5.5 % per annum The U.S.
9-month borrowing or lending rate is 3.2 % per annum A call or put option for the strike price of DKK 6.90/$ carries a premium of 1.14 percent for this period.Based on the above information, first please read again the entire instructions above, then answer the following FIFTEEN questions (why so many? See above!).1.If your company chooses to hedge this exposure in the forward market, calculate the outcome of this hedge in the US dollar.
2.
If your company chooses to hedge this exposure in the forward market, the outcome of this hedge in the US dollar is certain (=1, enter 1 in the template), risky (=2, enter 2 in the template), certain and risky (=3, enter 3 in the template).https://www..com/file/16786858/Exam-2/ This study resource was shared via CourseHero.com 3 3.If your company hedges this exposure in the money market, calculate the outcome of this hedge today assuming the company borrows and invests at the prevailing market rates that are cited above.4.If your company hedges this exposure in the money market, calculate the outcome of this hedge in nine months assuming the company borrows and invests at its WACC rate.5.If your company hedges this exposure in the money market, the outcome is (chose the best answer) Known (=1), unknown (=2), risky (=3), known and certain (=4).
6.If the options market is employed as a hedge, and if the company eventually exercises the option at the very end of the period, calculate the amount from only exercising the option.7.If the options market is employed as a hedge, and if the company eventually exercises the option at the very end of the period, calculate the total outcome of this hedge.The company uses its WACC when it enters the options market.8.If the options market is employed as a hedge, and if the company does not exercise the option, calculate the cost of the option at the beginning of the period.The company uses its WACC when it enters the options market.
9.If the options market is employed as a hedge, and if the company does not exercise the option, calculate the cost of the option at the very end of the period.The company uses its WACC when it enters the options market.10.If the options market is employed as a hedge, and if on the very last day of the option maturity, the spot rate would be DKK 7.19, calculate the total outcome of the option hedge.The company uses its WACC when it enters the options market.11.If the options market is employed as a hedge, and if on the very last day of the option maturity, the spot rate would be DKK 6.91, calculate the total outcome of the option hedge.
The company uses its WACC when it enters the options market.12.If the company chooses not to hedge at all, the outcome is known (=1), unknown (=2).13.
If the company chooses not to hedge at all, the outcome is certain (=1), risky (= 2).14.If the company chooses not to hedge at all and its forecasts turn out to be correct, calculate the outcome of this scenario.15.
Some of the hedging strategies that are covered in Chapter 10, e.g., options, futures, etc., are simple examples of derivatives.I agree (=1).I disagree (=2) Estimated rate of returns State of the Probability T-Bills Nescom Nawab PK_Steel Pak Market portfolio Recession 0.1 3% -14.25 12.25
Estimated rate of returns State of the Probability T-Bills Nescom Nawab PK_Steel Pak Market portfolio Recession 0.1 3% -14.25 12.25 1.75 -9.75 Below average 0.2 3% -4.75 5.25 -8.25 -2.75 Average 0.4 3% 6.25 -0.5 0.25 3.75 Above average 0.2 3% 13.75 -2.5 19.25 11.25 Boom 0.1 3% 21.25 -10 11.75 17.75 Expectred Returns St.Deviation 0% CV Beta JS Capital staff has estimated the probability values for the state of the economy,and also estimated the corresponding rate of return oneach alternative under each state of the economy.Nescom.is technology firm, Nawab collectspast-due debts, and PK_Steel manufactures steel products.JS capital also maintains a “market portfolio” that owns a market-weighted fraction of all publiclytraded stocks on Pakistan exchange market; you can invest in that portfolio and thus obtain average stock market results.
Given thesituation described, answer the following questions:1.Why is the T-bill’s return independent of the state of the economy? Do T-bills promise a completely risk-free return? Explain?2.Why are Nescom returns expected to move with the economy, whereas Nawab’s are expected to move counter to the economy?3.Calculate the expected rate of return on each alternative.4.You should recognize that basing a decision solely on expected returns is appropriate only for risk neutral individuals.Your client is risk-averse, the riskiness of each alternative is an important aspect of the decision.One possible measure of risk is the standard deviation of returns.
Calculate this value for each alternative.5.What type of risk is measured by the standard deviation?6.Suppose you suddenly remembered that the coefficient of variation (CV) is generally regarded as being a better measure of stand-alone risk than the standard deviation when the alternatives being considered have widely differing expected returns.Calculate the CVs and interpret the results.7.Suppose you created a two-stock portfolio by investing Rupees 50,000 in Nescom and Rupees 50,000 in Nawab.Now Calculate the expected return of portfolio, the standard deviation of portfolio and the coefficient of variation of portfolio.Also write about how the riskiness of this two-stock portfolio compares with the riskiness of the individual stocks if they were held in isolation?8.
Assume that the expected rates of return and the beta coefficients of the alternatives supplied by an independent analyst are as follows: Security Estimated rate of returns Beta Nescom 5% 1.5 Market 4 1 Pk_Steel 3.5 0.75 T_Bills 3 0 Nawab 1 -0.6 § What is a beta coefficient, and how are betas used in risk analysis?§ Do the expected returns appear to be related to each alternative’s market risk?§ Is it possible to choose among the alternatives on the basis of the information developed thus far? 9.Assumes that the risk-free rate is 3.0%, and risk premium is expected return on market portfolio less risk.§ Write out the security market line (SML) equation; use it to calculate the required rate of return on each alternative?§ How do the expected rates of return compare with the required rates of return? Identify the undervalued companies? Which of the following statements about Private Markets are true?1 point Private companies tend to be smaller companies that cannot
Finance Which of the following statements about Private Markets are true?1 point Private companies tend to be smaller companies that cannot access financial markets.Professional private equity investor tend to take an active role in running the companies in which they hold equity.An advantage that private investments have over public investments is their lack of liquidity.Public companies are traded on stock exchanges and are not required to disclose financial accounts and earnings.”Unicorns” are private companies that have reached a valuation in excess of $1 billion.Private companies tend to be at an earlier stage of development and hence it is relatively easy to pick exceptionally successful companies among these.More than 1 option can be true.
Year 0 1 Revenue 700.00 Fixed costs 100.00 Variable costs 200.00 Additional investment in NWC 10.00 Additional investment in operating
Year 0 1 Revenue 700.00 Fixed costs 100.00 Variable costs 200.00 Additional investment in NWC 10.00 Additional investment in operating long-term assets 70.00 Depreciation 60.00 Interest expenses 35.00 Newly issued debt 25.00 Principle repayments 15.00 Tax rate 0.40 Market value of the firm: Price per share Number of shares Market value Short-term debt 100.00 Long-term debt 600.00 Preferred stock 10.00 10 100.00 Common stock, equity 18.00 100 1,800.00 Total 2,600.00 Cost of equity (Rs) 0.12 Growth rate per year from year 1 through year 5 0.12 Growth rate after year 5 0.05 What is the price per share based on the equity free cash flow model? You are considering starting a professional services business in the finance industry (pick one) with some of your colleagues.You
You are considering starting a professional services business in the finance industry (pick one) with some of your colleagues.You are preparing a business plan and it is decided that you will be the one to research your financial legal obligations for your business.For this question you should consider· What are the legal obligations for not only yourself personally as a practitioner, but also the firm in managing its employees?· Licensing obligations (if any) to start your business and remain in good standing· Duties and legal obligations to your clients or customers.· Reporting obligations to any applicable regulators (if any)· Possible policies and practices to encourage ethical behaviour beyond what is required by law.Please Note: It is expected that answers will differ significantly for this question.Whilst some of these dot points may not be necessary, students should make this clear (e.g ‘there are no disclosure obligations for our business).Students might also wish to include some of their own headings where appropriate.
Willerton Industries Inc.has the following balances in its capital accounts as of 12/31/X3: Long-term debt $75 Preferred stock 2 Common stock
Willerton Industries Inc.has the following balances in its capital accounts as of 12/31/X3: Long-term debt $75 Preferred stock 2 Common stock 4 Paid in excess 2 Retained earnings 325 Calculate Willerton’s capital structure based on book values.Round the values to the nearest dollar and the weights to two decimal places of percentage.Value WeightDebt $ %Preferred stock %Equity %Total %2 Asbury Corp.issued 30-year bonds 11 years ago with a coupon rate of 9.5%.Those bonds are now selling to yield 7%.
The firm also issued some 20-year bonds 2 years ago with an 7.8% coupon rate.The two bond issues are rated equally by Standard and Poors and Moody’s.Asbury’s marginal tax rate is 30%.Assume face value of the bonds is $1,000.Assume that the coupon payments are semi-annual.a) What is Asbury’s after-tax cost of debt? Round the answer to two decimal places.%b)What is the current selling price of the 20-year bonds? Round the answer to the nearest cent.$ Consider the developments during and after the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in
Consider the developments during and after the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in Australia.Outline at least one example of criminal or unethical conduct that has been uncovered by the Royal Commission.In light of this misbehaviour, what reforms, legal or otherwise, should Australia be considering? If reforms have already been implemented, comment upon when you believe they go far enough and/or are likely to bring about ethical behaviour.
Explain the extent to which digital or ‘crypto’ currencies are regulated in Australia.Do you think the current regulatory environment
Explain the extent to which digital or ‘crypto’ currencies are regulated in Australia.
Do you think the current regulatory environment is sufficient and can you think of any reform(s) which might strengthen the current regulatory environment? Can you think of any problems that may arise in the future?See:https://asic.gov.au/regulatory-resources/digital-transformation/initial-coin-offerings-and-crypto-currency/ Problem 15 A U.S.exporter has accounts receivables in 4 countries: Switzerland (CHF 50M), England (£50M), Germany (€50M) and Italy
Problem 15 A U.S.exporter has accounts receivables in 4 countries: Switzerland (CHF 50M), England (£50M), Germany (€50M) and Italy (€50M).Given the Covid-19 pandemic and potential repercussions in Europe, where do you see the potential risks going forward? What instruments would you use and how much of the risk would you hedge and in which currency? Give a detailed explanation! Essay Writing at Literature Review Centre 4.9 rating based on 36 ratings
Rated 4.9/5.
