How the fluctuation in return is eliminated

Reference no: EM131209391

Assume that Happy Days, Inc., pays an 8 percent return during expansions and a zero percent return during recessions with certainty. Sad Days, Inc., pays a zero percent return in expansions and an 8 percent return in recessions with certainty.

Show how the fluctuation in return is eliminated if an investor splits his or her surplus funds equally between HappyDays and SadDays.

Reference no: EM131209391

Questions Cloud

Calculate free cash flow : Purchase of short-term investments 4,570Sale of short-term investments (450) 6,320The firm made interest payments of $1,430 million and received $780 in interest receiptsfrom T-bills that it held. The tax rate is 35 percent. Calculate free cash fl..

What is the price expected one year from now : If the current price is $100 and the instrument does not pay interest or dividend, what is the price expected one year from now when the market is in equilibrium?

Identify one change you would recommend to the sec reporting : Identify one change you would recommend to the SEC reporting requirement for publically traded companies and discuss how it would affect financial reporting.

Describe the company internal and external stakeholders : Describe the expansion project, the country in which the expansion will take place, and the reasoning behind this expansion into this country at this particular time. In other words, why does this particular project and country make sense for your..

How the fluctuation in return is eliminated : Show how the fluctuation in return is eliminated if an investor splits his or her surplus funds equally between HappyDays and SadDays.

List two services that fis provide to the public : List two services that FIs provide to the public. - Why do intermediaries provide these ser vices? What is a contingent financial claim?

Explain how seemingly contradictory statement can be true : "With financial intermediation, net lenders can earn a higher return on their surplus funds, and net borrowers can acquire funds at a lower cost."

Discuss the significance of orwells novel animal farm : Discuss the significance of Orwells novel ANIMAL FARM - Describe the fiasco of Charlie's funeral? What does this further tell us about the Stasi?

Apply fraud triangle model to discuss the world-com fraud : OMBA 6315 Ethics Essay Assignment. Apply the fraud triangle model to discuss the World-Com Fraud and briefly discuss how Gebler's approach to "Creating An Ethical Culture" could have made a difference for Betty Vinson. You are limited to 400 words..

User Account

All Pages