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The employee credit union at State University is planning the allocation of funds for the coming year. The credit union makes four types of loans to its members. In addition, the credit union invests in risk-free securities to stabilize income. The various revenue-producing investments together with annual rates of return are as follows: Type of Loan/Investment Annual Rate of Return (%) Automobile loans 9 Furniture loans 11 Other secured loans 12 Signature loans 13 Risk-free securities 10 The credit union will have $2.3 million available for investment during the coming year. State laws and credit union policies impose the following restrictions on the composition of the loans and investments: • Risk-free securities may not exceed 30% of the total funds available for investment. • Signature loans may not exceed 10% of the funds invested in all loans (automobile, furniture, other secured, and signature loans). • Furniture loans plus other secured loans may not exceed the automobile loans. • Other secured loans plus signature loans may not exceed the funds invested in risk-free securities. How should the $2.3 million be allocated to each of the loan/investment alternatives to maximize total annual return?
What was the maturity value of the loan?
what is the option worth today if the one year risk free rate is 5%. Use the binomial option pricing model to find this value.
A mixing praces for laboratory-grade sodium phospbate has an estimated first cost of $320000 with annual costs of $4000.
Uptown construction is comparing two different capital structures. Plan i would result is 23,000 shares of stock and 320,000 in debt. Plan ii would result in 17000 shares of stock and 260,000 in debt.
You want to hedge against your portfolio value declining more than 10% in 1 year. Currently, the S&P500 is standing at 2,000 and your portfolio has a beta of 1.6. You need to purchase 1-yr S&P500 put options. Find the exercise price of the index put ..
You are considering making a bid for a contract for modifying stripped down truck platforms for a local distributor. The distributer has requested bids for 6 specifically modified trucks each year for the next 4 years for a total of 24 trucks in all.
Define CDOs (Collateral Debt Obligations). How did Michael Burry seek profit in anticipation of the financial market collapse and was he successful? What was the most surprising fact you learned in this movie?
Hastings Entertainment has a beta of 0.72. If the market return is expected to be 17.40 percent and the risk-free rate is 6.40 percent, what is Hastings’ required return?
The economy is slowing down, not growing and unemployment is going up. If you are on the Federal Reserve Board of Governors what type of policy would you pursue? Please be specific on the tools of monetary policy.
Suppose you invest $7,000 in Stock A and $3,000 in Stock B. The variance of Stock A is 50 percent, the variance of Stock B is also 50 percent, and the covariance between the two stocks is 0 percent. What is the variance of your portfolio in percent?
what should be considered to understanding the laws, regulations and tax requirement for each type of business ownership?
What rate should he quote for APR if the interest is to be compounded monthly? What is the firm’s sales?
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