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Assume that all stock market returns have the market index as a common factor, and that all stocks in the economy have a beta of 1 on the market index. The firm-specific components of stock returns are uncorrelated and have a standard deviation of 30%. Suppose that an analyst studies 50 stocks, and finds that one-half have an alpha of 2.6%, and the other half have an alpha of -4%. Suppose the analyst buys £1 million of an equally weighted portfolio of the positive alpha stocks, and sells £1 million of an equally weighted portfolio of the negative alpha stocks.
What are the expected profit (in pounds) and the standard deviation of the analyst’s profit (in pounds)?
What would your answer be if the number of stocks were 100 instead of 50? Explain your results.
When deciding to fund a project, a financial manager considers the Net Present Value, the Internal Rate of Return, the Profitability Index, and Payback Period.
The statistical measures that characterize dispersion are: Define standard deviation. A discrete random variable is:
Which of the following actions will best enable a company to raise additional equity capital, other things held constant?
Conduct an analysis of your selected organization’s financial statements and identify the organization’s short and long term financing risks in its future financial planning. Evaluate the entire selected organization and identify any ethical or uneth..
Latoya's balance on student loans is $24,000 today (first day of month). The rate on the loan is 6% NAR with monthly compounding. Latoya would like to pay off the loan in three years. The first payment would be at the end of the present month. What e..
Why was the foundation of the Bretton Woods system, and why did it eventually fail? What lessons can economists draw from the breakdown of the Bretton Woods sys
The last dividend paid by Lynwood Properties was an annual dividend of $1.20 a share. Dividends for the following 4 years will be increased at an annual rate of 12 percent. After that, dividends are expected to increase by 2 percent each year. The di..
XD bonds carry a 10% annual coupon, have a $1,000 face value and mature in 4 years. Bonds of equivalent risk yield 15%. Find the market value of XD bonds. XD is in financial difficulty and has asked its bondholders to accept the following deal. The f..
A convertible bond has a par value of $1,000, but its current market price is $950. The current price of the issuing company's stock is $19, and the conversion ratio is 40 shares. What is the bond's conversion premium?
Suppose you have a 10%, 20 year bond traded at $1,120. If it is callable in 5 years at $1,150, what is the bond’s approximate yield to call? Interest is paid quarterly.
What is? Avicorp's pre-tax cost of? debt? Note: Compute the effective annual return.
If the Goodsmith Charitable Foundation borrowed money this year, what would the aftertax cost of debt be, based on their cost last year
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