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The observed bid and ask of stock XYZ are 15.57 and 15.71, respectively. XYZ has an estimated annualized return volatility of 25%. Assume σspread=0.005 and 250 trading days in one year. a. Estimate the 1-day, 95% VaR of a 5,000 share position in stock XYZ. b. Estimate the 1-day 95% LVaR of the position, using the constant spread approach. c. Estimate the LVaR to VaR ratio using the exogenous spread approach. d. Suppose the position represents 10% of the size of the market and price elasticity of demand for stock XYZ is -0.6. Calculate the LVaR to VaR ratio using the endogenous price approach. e. Calculate the combined LVaR to VaR ratio incorporating both exogenous and endogenous effects.
Rolston Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $26,500, and the company expects to sell 1,500 per year. If the tax rate is 38 percent, what is the annual OCF for the project?
Smith's Dairy Products reported sales of $1.5 million in 2012 and $2.25 million in 2013. The firm's EBIT was $550,000 in 2012 and rose to $925,000 in 2013. What is the company's operating leverage?
The ramirez company's last dividend was 1.75. it's dividend growth rate is expected to be constant at 25% for 2 years after which dividend are expected to grow at rate of 6% forever. it's required return is 12% what is the best estimate of the curren..
What was last year’s dividend per share?
A shopping center is considering paying $15,000 for a snow plow and blower, which will have a 5 year life, a negligible salvage value, and daily O&M expenses of $150. The firm can alternatively contract to have the snow removed at a cost of $450/day...
Drongo Corporation's 4-year bonds yield 5.95%. The real risk-free rate is 2.29%. The maturity risk premium is estimated to be 0.08%(t-1), where t is equal to the time to maturity. The default and liquidity premiums for Drongo's bonds total 0.66% and ..
A buyer for BestBuy is negotiating with a manufacturer to purchase an order of edge-lit 58 inch 3D LED televisions. She negotiates a price of $1,210. BestBuy ma
Target is expected to pay a dividend in year 1 of $2.11, a dividend in year 2 of $4.96, and a dividend in year 3 of $6.24. After year 3 dividends are expected to grow at the rate of 8% per year. Currently, target has a beta of 1.25, and the market pr..
Explain how diversification can help investors realize their investment goal of maximizing return while minimizing risk. In your answer give an estimate of how many stocks are needed to achieve your investment goal.
A bond has a face value of 10000 and a coupon rate of 6% with an original maturity of 10 years with six years to maturity left. If yields on bonds of similar risk are expected to be 6.6% in two years what will the value of the bond be then?
The Gilbert Instrument Corporation is considering replacing the wood steamer it currently uses to shape guitar sides. The steamer, purchased just 2 years ago, is being depreciated on a straight-line basis and has 6 years of remaining life. Its curren..
The spot price of the TECHWIG index at the Warsaw Stock Exchange in Poland is 1020 Polish Zloty (PLN). The risk-free interest rate for the next six month period is 1.98% (this is a six month rate, not annualized). Calculate his rate of return on this..
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