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Investment Opportunities information given:
Beased on Historical date (Annual Stats fro 1966-1977)Investment Average return Standard deviationSmall Cap Stocks 18.0% 15.0%Large cap stocks 15.0% 15.0%U.S treasuray bonds 5.4% 8.35%U.S treasury bills 4.1% 3.25%
a. What is the risk premium on small cap stocks?
b. What is the range of returns for large cap stocks you would expect to see 95% of the time?
c. How often will you lose money on large cap stocks? Show you work to justify response.
d. Given this table, would you choose to invest in small cap stocks over large cap stocks? Summarize your answer in a sentence.
The pure rate of interest is 3%,investors demand a 5% inflation premium on long-term investments, and risk premium for a stok with beta of 1 is 7%.ZZZ stock has a beta of 1.35
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A $1000 value convertible bond with conversion price of $50. It sells for $1,120 despite the fact bond's coupon ate determine the convertible bond's conversion premium?
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