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BEHAVIORAL FINANCE
Individual Coursework
The "volatility puzzle" has its origins in the early work of Shiller (1981) and LeRoy and Porter (1981), which found evidence of excessive volatility of stock prices relative to the underlying dividend/earnings process.
Despite subsequent relaxation of assumptions, Shiller's conclusion could not be overturned for reasonable values of the coefficient of relative risk aversion.
With reference to relevant literature and empirical studies, critically evaluate why this is a puzzle.
Does behavioral theory offer a better explanation to this phenomenon?
Word limits: 2,500
You deposit 5% of your $40,000 annual income in a 401(K) plan at the end of each year. Your employer matches 2% of your earnings. You expect the plan to earn 10% and you are in the 25% tax bracket. Assuming the employee actual annual investment is $3..
Calculate the weights for each of the three categories of capital based on market value.
A bond portfolio is worth $24,000,000 today. The futures price for a Treasury note futures contract is $110,000 and each contract is for the delivery of bonds with a face value of $100,000. How many contracts are necessary for hedging the bond portfo..
The 50,000 liquidation value reflects enhancements realized through capital investments in fixed assets. The NPV and IRR of the DKK Project is closest to
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Suppose you have a bond with 5 years to maturity. what is the bond’s yield to maturity (YTM)?
Find the operating breakeven point in a number of DVDs. Calculate the total operating costs at the breakeven volume found in part (a).
Calculate the value of a call option on the stock in the previous problem with an exercise price of 110. Verify that the put-call parity theorem is satisfied.
If your MARR is a 10% semiannual effective rate what must you be able to purchase the bond for if you plan to sell it after 5 years?
Firm R has sales of 96,000 units at 1.98 per unit, variable operating cost of $1.73 per unit, and fixed operating cost of $6,010. Interest is $10,060 per year. Compute the degree of operating, financial, and total leverage for the firm R. Compute the..
In which way is the discounted cash flow valuation method similar to the direct capitalization method of valuation?
The year is 2030, and mobility as we know it is changing very fast providing new commuting options for consumers,
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