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Monica wants to select an equity fund that will perform the best based on her market expectations. She expects that in?ation will remain within the lower limit of the Reserve Bank of Australia in?ation band. Monica expects interest rates to decrease in the near future. Economy is expected to slow down and consumers are pessimistic about future employment. Allocation to industry sector allocation are as follows: Large Cap Small Caps 80% 20% 60% 40% 40% 60%
1. Explain why do small caps firms provide higher volatility than large cap ?rms? Your answer should focus on the ?rms' earnings and NOT on firms' variability of returns
2. Explain which Fund should Monica select to maximise her returns based on her forecast of the market conditions?
3. Explain what are Value investments and give an example to show how a small cap firm in the technology sector can be considered a Value investment? Your example should not be based on systematic market and industry movements.
How much will the stock price have to appreciate for you to satisfy your required rate of return of 18 percent?
Consider a six month American put option on 500 ounces of gold with a strike of $1300 per ounce. The spot price per ounce of gold is $1300 and the annual financing rate is 2% on a continuously compounded basis. Compute u, d, as well as p for the sta..
Is the spread larger for the short-term or the long-term maturity?
Floyd wants to invest the $15,000 he received from his grandfather's estate. - What amount will he have in five years if he earns a 9% return? If he receives a 10% return? A 12% return?
A stock is currently trading at a price of 22. You observe the following prices for European call options on the stock (the strikes are in parentheses):
A Euro option costs $0.006 per Euro and gives the right to sell Euro for $1.10. Is this a call or a put option?
What is the exercise value of the put option? What is the time premium of the put option?
Dante Co. wishes to maintain a growth rate of 10.2 percent a year, a debt–equity ratio of .9, and a dividend payout ratio of 20 percent. The ratio of total assets to sales is constant at .81. What profit margin must the firm achieve?
If the market index subsequently rises by 9.1% and Ford's stock price rises by 9%, what is the abnormal change in Ford's stock price?
After hearing the advice that it is usually best to buy life insurance from a person who has been in the business at least five years, a life insurance company general agent became upset and said rather vehemently, “How do you think we could recruit ..
Under what conditions should a business estimate divisional costs of capital?
Annual costs for operating and maintaining the machine are estimated to be $14,000. MARR (Minimum attractive rate of return) is 10% per year.
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