Reference no: EM13913620
The prices and other information of two stocks in the market are listed in the table:
Stock BHP: Price at year beginning ($50) Forecasted price at year end ($52) Forecasted dividend in the year ($3) Variance of returns (9%) Stock CBA: Price at year beginning ($100) Forecasted price at year end ($111), Forecasted dividend in the year ($8) Varince of return (16%).
You have $100 of your own money that you are going to invest in the market according to one of two trading strategies. In strategy A, you use margin purchase by borrowing an amount of money that is equal to your own money with an interest charge of 10%. In strategy B, you are allowed to short sell stocks that the value of the short position is equal to your own money. Then you are able to use your own money and the proceeds from short sale for further investment. Assume no margin deposit requirement and no other fee charge. The correlation coefficient of returns between the two stocks is 0%.
Required: (1) If you use strategy A (margin purchase), what is the maximum total $ return and rate of return achievable on your own money (i.e.: calculated on your investment)?
(2) If you use strategy B (short sale), what is the maximum total $ return and rate of return achievable on your own money (i.e.: calculated on your investment)?
(3) Assume that you have unlimited money and you do not borrow money or short sell stocks, what is the expected return and risk (standard deviation) of your global minimum risk portfolio with the investment in the two stocks?
Global minimum risk portfolio with investment in two stocks
: The prices and other information of two stocks in the market are listed in the table: You have $100 of your own money that you are going to invest in the market according to one of two trading strategies. In strategy A, you use margin purchase by bor..
|
Cost of materials attributable
: Whitewater Co. is a U.S. company with sales to Canada amounting to C$8 million. Its cost of materials attributable to the purchase of Canadian goods is C$6 million. Its interest expense on Canadian loans is C$4 million. Given these exact figures abov..
|
Necessary worksheet entries
: MAKE THE NECESSARY WORKSHEET ENTRIES FOR 2016
|
Barton corporation issued
: On January 1 of the current year, the Barton Corporation issued 10% bonds with a face value of $200,000. The bonds are sold for $191,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31
|
The prices and other information of two stocks in market
: The prices and other information of two stocks in the market are listed in the table: Stock BHP: Price at year beginning ($50) Forecasted price at year end ($52) Forecasted dividend in the year ($3) Variance of returns (9%) Stock CBA: Price at year b..
|
Assume that interest rate parity holds
: Assume that interest rate parity holds and that 90-day risk-free securities yield 3% in the United States and 3.6% in Germany. In the spot market, 1 euro equals $1.38 dollar. Is the 90-day forward rate trading at a premium or discount relative to the..
|
A supplementary payroll sheet that lists
: Adams, Inc., pays its employees' weekly wages in cash. A supplementary payroll sheet that lists the employees' names and their earnings for a certain week is shown below.
|
What is payback period
: Amp, Inc, has invested $ 2165800 on equipment. the firm uses payback period criteria of no accepting any project that takes more than 4 years to recover cost. the company anticipates cash flows of $451,386 $ 512,178 $ 564255 $ 764,997 $ 816,500 and $..
|
About the estate tax exemption
: Abe and Jan are well to do and are concerned that the estate tax exemption of $10,500,000 (combined) will not be sufficient to avoid estate taxes. The have 3 married children and 7 grandchildren. They would like to give about $300,000 per year to the..
|