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Consider the monthly simple returns of the Decile 1, Decile 5, and Decile 10 of NYSE/AMEX/NASDAQ based on market capitalization. The data span is from January 1960 to December 2003, and the data are obtained from CRSP.
(a) For each return series, test the null hypothesis that the first 12 lags of autocorrelations are zero at the 5% level. Draw your conclusion.
(b) Build an AR and an MA model for the series of Decile 5.
(c) Use the AR and MA models built to produce 1-step to 3-step ahead forecasts of the series.
New-Project Analysis The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's R&D department The equipment's basic price is $70,000, and it would cost another $15,000 to modify..
Calculate the required rate of return for Manning Enterprises assuming that investors expect a 4.5% rate of inflation in the future. The real risk-free rate is 1.5%, and the market risk premium is 3.5%. Manning has a beta of 2, and its realized rate ..
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Suppose that a firm’s recent earnings per share and dividend per share are $3.50 and $2.50, respectively. Both are expected to grow at 7 percent. However, the firm’s current P/E ratio of 16 seems high for this growth rate. Compute the dividends over ..
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Which statement is true concerning the one-year after-tax return on the following stocks, assuming a 40% tax rate on dividends and a 20% tax rate on capital gains: Stock A is purchased for $50, offers a 5% dividend yield, and is sold for $56; stock B..
Investments B and C both have the same standard deviation of 20% and have the same correlation to the market portfolio. If the expected return on B is 15% and the expected return on C is 18%, which investment would investors prefer? The market return..
A pension plan is obligated to make disbursements of $1 million, $2 million, $5 million and $1 million at the end of each of the next four years, respectively. Find the duration of the plan’s obligations if interest rates are flat at 10% annually.
Define the optimal fraction of debt and the growth rate of a firm. What is the relationship between the two?
Given a firms liabilities an increase in interest rates reduces thefirm's net worth because - difficult to keep inflation and output fromfluctuating when aggregate expenditures change because
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