Fin 503
Spring 2015
HW#2
Please refer to the case titled Alex Sharpes Portfolio and do the following problems:
1. Estimate and compare the returns and variability (i.e., annual standard deviation over the past
five years) of Reynolds and Hasbro with that
Portfolio Analysis Problem (Excel Spreadsheet)
Solve the following portfolio analysis problem using excel. Be sure to create
a general spreadsheet as you will be graded by the accuracy of your
spreadsheet for the 8 computations below with a change in some
Financial Management
Homework No. 4
Team Members
Pedro Melendez
Armando Martinez
Aisha Ahmadu
Christopher Najar
Rashmi Kudikala
Nazir Ahmed
Sweata Lal
Price values are in millions
Black-Scholes Option Pricing Model
Inputs:
Stock Price (S)
Strike Price (X)
SUMMARY OUTPUT
Regression Statistics
Multiple R
R Square
Adjusted R Square
Standard Error
Observations
0.8857769346
0.7846007779
0.7805366416
8.004286813
55
ANOVA
df
Regression
Residual
Total
SS
Coefficients
Intercept
X Variable 1
MS
F
Significance F
1 12
FIN 503 HW#5
1) Suppose that you hold a share of stock and a put option on that share. What is
the payof
when the option expires if
( a ) the stock price is below the exercise price?
The payoff is the difference amount between the exercise price and the
m
Equivalent Annual Cash Flow is the annual cash flow required to cover the initial investment, and the cost of capital, over the life of the project or machine.
This provides a more realist number to compare two projects by putting their cash flows, regard
SUMMARY OUTPUT
Regression Statistics
Multiple R
R Square
Adjusted R Square
Standard Error
Observations
0.5244693686
0.2750681186
0.2688721196
0.1469373471
119
ANOVA
df
Regression
Residual
Total
SS
1
117
118
Coefficients
Intercept
X Variable 1
0.0034813399
Stock X
Expected Return
Standard Deviation
Correlation
10%
15%
-0.2
Weight X
Weight Y
Sum of Weights
Stock Y
20%
25%
0.300001
0.699999
1
Portfolio STD
Portfolio Expected Return
0.171755
0.1699999
Weight X
Weight Y Port STD Expected Return
0.3 0.11619
0.13
A widget manufacturer currently produces 200,000 units a year.
It buys widget lids from an outside supplier at a price of $2 a lid.
The plant manager believes that it would be cheaper to make these lids rather than buy them.
Direct production costs are es
Estimate the per-film value of a portfolio of sequel rights such as Arundel proposes to buy
S
13.73
U
1.353
X
22.6
D
0.739
121%
R
1.033
Rf
6.56%
p
0.479
T
0.5
1-p
0.521
Lattice of underlying asset
Value of Call Option
84.30
62.29
46.03
34.02
25.14
S = Ave
Option to introduce Guarana to the rest of the U.S market at the end of five years ($ million)
S
750
U
1.4191
X
1000
D
0.70469
35%
R
1.05
Rf
5%
p
0.483373235
T
1
1-p
Underlying asset
Value of call option
0.516626765
4315.95
2143.24
1510.31
1064.30
NPV of
Name
Weight A =
Prob
A
0.3
0.4
0.3
M
20
18
10
Expected Return A =
Expected Return M =
Standard Deviation A =
Standard Deviation M =
Covariance (A,M) =
Correlation (A,M) =
Expected Return P =
Standard Deviation P =
Beta of A =
W(A) =
W(M) =
0.3
16
10
14
16
Correct Answer
Question 1 a I 4 P15
Compute the present value of an annuity due with $5,000 annual payments over 8 years
at a H3 interest rate.
9 29,856
31,946
40.000
54.890
Question 2 4 4' 4 P15
Given time D through 5 cash flows of DQDDDQDDD,1DDD,