Reference no: EM133060336

Questions -

Q1- A firm is expected to generate return on equity of 8.4% in the next year. It is expected to generate EPS of $4.58 in the next year. It maintains a constant pay-out ratio of 40%. If the cost of equity is 9.94%, what is the price of the firm's shares?

Q2- A firm is expected to generate earnings per share of $6 in the next year, and these earnings are expected to grow at 4.6% per annum in perpetuity. The firm maintains a constant plowback ratio of 30%. If the beta of the firm's shares is 0.6, the market risk premium is 11.1% and the risk-free rate is 3.3%, what is the firm's P/E ratio?

Q3- A firm is expected to generate an EPS of $1.85 over the next year, and this is expected to grow at a constant rate of 2.7% in perpetuity. It maintains a constant payout ratio of 60%. If the cost of equity is 5.4%, what is the present value of growth opportunities?

Q4- What is the price (per $100 of face value) of a bond which makes semi-annual coupon payments at a coupon rate of 8.4% p.a. and which has 6 years to maturity, if the bond is trading at a yield of 4.2% p.a.?

Q5- If the current 4-year yield on government bonds is 4.6% and the current 3-year yield is 2.6%, what is the implied 1-year forward rate 3 years from now?

Q6- A consol is a special type of government bond that lasts forever. What is the duration of a consol which will make a $10 coupon payment every year in perpetuity, if it is currently trading at a yield of 7.5% p.a.?

Q7- What is the duration of a 3.9% coupon bond which makes semi-annual coupon payments, has 2 years to maturity and is trading at a yield of 3.9% p.a.?

Q8- What will be the approximate percentage change in the price of a bond with a duration of 8.2 years, which is trading at a yield of 8.1%, if there is a 1 basis point decrease in the yield?

Q9- What is the convexity of a $1000 6.1% annual coupon bond which has two years to maturity and is trading at a yield of 3.7% and a price of $1045.46?

Q10- The average excess return on a portfolio is 15.8% and the average excess return on the market is 10.3%. The covariance between returns on the portfolio and returns on the market is 0.010169 and the variance of returns on the market is 0.012996. What is the portfolio's Jensen's alpha?

Q11- The average excess return on a portfolio is 17.2% and the risk-free rate of return is 3.6%. The covariance between returns on the portfolio and returns on the market is 0.016585 and the variance of returns on the market is 0.017161. What is the portfolio's Treynor ratio?

Q12- The average excess return on a portfolio is 19.8% and the average excess return on the market is 11.0%. The risk-free rate is 2.4%. The covariance between returns on the portfolio and returns on the market is 0.012065 and the variance of returns on the portfolio is 0.0361. What is the portfolio's Sharpe ratio?