Assignment 2 - Jason Wilcox Assignment 2 Investing P4.5 A....

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Jason Wilcox Assignment 2 Investing P4.5 A. (1) Year (2) Income (3) Beginning (4) Ending (5) Capital Gain 2+5 Return($) 2004 1.00 30.00 32.50 2.50 3.50 2005 1.20 32.50 35.00 2.50 3.70 2006 1.30 35.00 33.00 -2.00 -0.70 2007 1.60 33.00 40.00 7.00 8.60 2008 1.75 40.00 45.00 5.00 6.75 B. If the pattern continues then 2009 will have a loss and given the data the loss was 80% of the previous two years capital gain So 2007 and 2008 capital gain was $7.00 and $5.00 which would be (12/2)*.8= 4.8. The pattern is two years of gain followed by one year of a loss which would then put 2010 as a gain. C . This investment seems to be very lucrative because although it has years of loss it goes two years with gains and those gains have doubled in just 3 years. Someone who would invest in this would have to expect loss at times but in the long term it would be a very good investment. P4.12 A. By using a financial calculator the yield was found with the data Present Value= $5000 and the Future Value that was promised in 10 years $9000. The estimated yield on this investment is 6% B. I would NOT recommend this investment if a minimum return of 9% is required because the investment yields less than the required return.
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P5.16 Formula used: Required Return=Risk-Free Rate+ (Beta x(Market Return-Risk-Free Rate) Security Risk-Free Rate Market Return Beta Required Return A 5% 8% 1.30 8.9% B 8% 13% 0.90 12.5% C 9% 12% -0.20 8.4% D 10% 15% 1.00 15% E 6% 10% 0.30 8.4% P5.22 A. Most Risky: B Moderately Risky: A Least Risky: C B. Stock A: 10.08 Stock B: 17.64
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This note was uploaded on 12/18/2010 for the course BME 251123 taught by Professor Grimmer during the Spring '10 term at SUNY Albany.

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Assignment 2 - Jason Wilcox Assignment 2 Investing P4.5 A....

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