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Here are returns and standard deviations for four investments. Return Standard Deviation Treasury bills 5.5% 0% Stock P 8.0 14 Stock Q 15.0 37 Stock R 23.0 22 Calculate the standard deviations of the following portfolios. a. 50% in Treasury bills, 50% in stock P. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Standard deviation % b. 50% each in Q and R, assuming the shares have: (Do not round intermediate calculations. Round your answers to 1 decimal place.) Standard Deviation Perfect positive correlation % Perfect negative correlation % No correlation %
First, create a butterfly spread strategy using these options. (1) $190 call priced at $11.51 , (2) $200 call priced at $8.22 and (3) $210 call priced at $7.55. Calculate the rate of return (in %), when the underlying stock price becomes $200. (margi..
Falcon Ridge Developers wants to compute the firm’s WACC for capital budgeting purposes. The firm uses 30% debt, 20% preferred stock and the remainder is in equity. The YTM on the firm’s debt is currently 4.5% and the firm’s marginal tax rate is 40%...
Discuss three examples of how evaluating control risk in an electronic environment differs from evaluating control risk in a manual environment. Also, give three examples of how the two environments are the same. Describe the main differences between..
Josh Smith has compiled some of his personal financial data in order to determine his liquidity position. Calculate Josh’s liquidity ratio. Several of Josh’s friends have told him that they have liquidity ratios of about 1.8. How would you analyze Jo..
What interest payments do bondholders receive each year? - At what price does the bond sell? - What will happen to the bond price if the yield to maturity falls to 6.3%?
A widget manufacturer currently produces 300,000 units a year. It buys widget lids from an outside supplier at a price of $4 a lid. The plant manager believes that it would be cheaper to make these lids rather than buy them. Direct production costs a..
You buy a(n) seven-year bond that has a 5.00% current yield and a 5.00% coupon (paid annually). In one year, promised yields to maturity have risen to 6.00%. What is your holding-period return?
What is the maximum car payment and mortgage payment you can afford with the following conditions: your monthly household income, 10% for the car payment, and 28% for the mortgage payments?
What is the difference between the expected rate of return and the required rate of return? What does it mean if they are different for a particular asset at a particular point in time?
You want to save $5,000 in three years time to pay for a trip overseas. How much money need you invest into a fixed deposit account, paying 5% per annum, for three years in order to reach your savings goal?
A corporation is going to have to pay a debt of $1,200,000 after one year, a debt of $1,500,000 after 2 years and $2,000,000 after 3 years. In order to set up an absolute matching strategy to pay these debts, the corporation may purchase: The spot ra..
Explain why historical charge off and past due data may not represent the bank's current portfolio credit risk.
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