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1. Consider a market consisting of N + 1 risky assets (define your own notation for the price of these assets over the epochs), and M states of the world. Consider the case of only two epochs (thus one period). (a) Define what it means by a replicating portfolio in this market. (b) Define what it means by a portfolio that leads to an arbitrage. (¢) State and show (without proof) the first fundamental theorem of finance (FF'T) (you need a numeraire here). (d) State and show the second fundamental theorem of finance (SFT).
Each year, the Internal Revenue Service adjusts the value of an exemption based on inflation (and rounds to the nearest $50). If the exemption in a recent year.
A regional restaurant chain, Club Café, is considering purchasing a smaller chain, Sally's Sandwiches, which is currently financed using 20% debt.
What determines whether a financial asset is included in the M1 money supply - Why are interest-earning checkable deposits included in M1, whereas interest-earning savings accounts and Treasury bills are not?
Investors anticipate that the annual dividend will rise by 6% per year forever. The required rate of return is 11%. What is the stock price today?
Fee founders has perpetual preferred stock outstanding that sells for $60 a share and pays a dividend of $5 at the end of each year. What is the required rate of return?
explain the following three concepts of purchasing power parity pppa. the law of one price.b. absolute ppp.c. relative
What is the net impact on the market value of a corporate bond if the bond rating of the issuing organization decreases and market interest rates increase? Why?
Suppose you are going to receive $10,000 per year for five years. The appropriate interest rate is 11 percent.
Can a business be ethical? What are the goals of competitive intelligence? Is it ethical to gather competitive intelligence?
A family buys a house worth $326,000. They pay $75,000 deposit and take a mortgage for the balance at J12=9% p.a. to be amortized over 30 years
After that, the firm will increase the dividend by 4% each year. What is the value of this stock today at a discount rate of 9%?
A project has an initial cost of $850,000 and lasts 5 years. Net cash flows in year 1-5 are $150,000, $250,000, $250,000, $100,000 and $400,000. What is the NPV if the required return is 8 percent?
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