Calculate the standard deviation of the return

Assignment Help Finance Basics

Reference no: EM1381227

1. The U.S. financial system is composed of: (1) policy makers, (2) a monetary system, (3) financial institutions, and (4) financial markets. Indicate which of these components is associated with each of the following roles:

a. accumulate and lend/invest savings

b. create and transfer money

c. pass laws and set fiscal and monetary policies

d. market and facilitate transfer of financial assets

2. Financial markets may be categorized as: (1) debt securities markets, (2) equity securities markets, (3) derivative securities markets, and (4) foreign exchange markets. Indicate in which of these markets the following securities trade:

a. residential mortgages

b. corporate bonds

c. corporate stocks

d. currencies

3. In business, ethical dilemmas or situations occur frequently. Laws and regulations exist to define what unethical behavior is. However, the practicing of high-quality ethical behavior often goes beyond just meeting laws and regulations. Indicate how you would respond to the following situations.

a. Your boss has just told you that tomorrow the Federal Drug Administration will announce its approval of your firm's marketing of a new breakthrough drug. As a result of this information, you are considering purchasing shares of stock in your firm this afternoon. What would you do?

b. In the past, your firm has been in compliance with regulatory standards relating to product safety. However, you have heard through the company grapevine that recently some of your firm's products have failed resulting in injuries to customers. You are considering quitting your job due to personal moral concerns. What would you do?

1. Determine the size of the M1 money supply using the following information.

Currency $700 billion

Money market mutual funds $2,000 billion

Demand deposits $300 billion

Other checkable deposits $300 billion

Traveler's checks $10 billion

2. The following information is available to you: travelers' checks

$1 million; coin and paper currency

$30 million; repurchase agreements and Eurodollars

$15 million; demand deposits $25 million; retail money market mutual funds

$60 million; savings accounts at depository institutions

$40 million; checkable deposits at depository institutions

$35 million; large-denomination time deposits

$50 million; institutional money market mutual funds

$65 million; and small-denomination time deposits

$45 million. Using Fed definitions, determine the dollar sizes of the

a. M1 money supply

b. M2 money supply

c. M3 money supply

3. Assume that the real output (RO) for a country is expected to be 2.4 million products.

a. If the price level (PL) is $250 per product, what will be the amount of the gross national product (GDP)?

b. Now assume that the GDP is projected to be $8 million next year. What will the PL of the products need to be to reach the GDP target?

c. Now assume that the RO of 2.4 million products is composed of equal amounts of two types of products. The first product sells for $100 each, and the second product sells for $500 each. What will be the size of the GDP?

FIN 100 QUESTION

1. Suppose that a security costs $1,500 today.

A. Calculate the percentage return on the security if the payoff to the security in one year is $1,000, $1,500, $2,000, or $2,500. (Note: This is the total amount returned to the investor, so you may just calculate the total return and not worry about how this is split up between current yield and capital-gains yield.)

B. If each of the outcomes in part a is equally likely, calculate the expected return on the security.

C. Calculate the standard deviation of the return on the security. (Again, assume that each of the outcomes in part a is equally likely.)

2. Suppose that a security costs $3,000 today and pays off some amount b in one year. Suppose that b is uncertain according to the following table of probabilities:

b: $3,000 $3,300 $3,600 $3,900 $4,200

Probability: 0.1 0.2 0.3 0.2 0.2

A. Calculate the return (in percent) for each value of b. (Note: You may just calculate the total return and not worry about how this is split between current yield and capital-gains yield.)

B. Calculate the expected return (in percent).

C. Calculate the standard deviation of the return.

D. Suppose that an investor has a choice between buying this security or purchasing a different security that also costs $3,000 today but pays off $3,300 with certainty in one year.

How is an investor's choice of which security to purchase related to his degree of risk aversion?

Reference no: EM1381227

Questions Cloud

Difference between perception and reputation : Discuss the difference between perception and reputation and explain how can organizational perception affect IT reputation?

Supplier partnership critical success factors : List two main implementation categories of the "supplier Partnership Critical Success Factors in the Phases of Implementation". Include the key elements that are associated with each.

Benefits of an information system : Suppose monetary advantages of an information system of $50,000 the 1st year and increasing benefits of $5000a year of the next four years year 1=$50,000;

Discussion on training : This issue of training is specific to each company, so there is no one size fits all plan. I do believe in training staff just before a new system is deployed,

Calculate the standard deviation of the return : How is an investor's choice of which security to purchase related to his degree of risk aversion and calculate the standard deviation of the return on the security.

Importance of presentation and content in presentation : There has been a discussion for years on which is more important, content or presentation. This is very important when thinking about creating a PowerPoint slideshow.

Identify potential printer from each company that could meet : Identify potential printers from each company that could meet the requirement. Clarify the warranty coverage and cost.

Total cost of ownership return on investment : Total Cost of Ownership Return on Investment. Explain each of these approaches, state your preference, and analyze the advantages and disadvantages of each with a focus on IT investments.

Application to input a character string : Output the string rotated to the right by a user-defined number of characters (0 or more). For example, Hello world!rotated by two characters would be: Hello world.

User Account

All Pages