Quiz #3
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this graded exercise.
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_ Data _
Initial Margin = .65
No interest on borrowing
Maintenance margin = .45
No
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graded exercise.
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1. Which of the following is a money market instrument issued by well-known corporations t
1
Use the information given in the table to answer questions #1 through # 2
Discount rate
(WACC)
4%
Initial Investment
(t=0)
10,000
Net Cash Inflow
(t = 1)
2,000
Net Cash Inflow
(t=2)
4,000
Net Cash Inflow
(t=3)
8,000
1. What is the net present value of t
In-class Exercise on Yields and Rates of Return
Bank Discount Yield /Bond Equivalent Yield/ Money Market Yield/ Effective Annual Yield
1.
A T-bill has a bank discount yield of 2% and matures in 150 days.
A.) What is the price of the T-bill?
.02 = [1000 P
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Multiple Choice Questions ( 3 pts. x 11 = 33 pts.)
1.) Which of the portfolios below must not be Markowitz efficient?
Portfolio A
Portfolio B
Portfolio C
Expected Return
10%
12%
10%
Standard Deviation
15%
16%
14%
A. higher risk,
1. You estimate the following time series model using S&P 500 stock returns from 1950 to
2013. Daily holding periods are used to measure returns.
r t+1 = r t + error t
Coefficient
Intercept
Slope
Estimate
0.15
0.98.
t-statistic
0.40
3.1
a.) What type of s
Broker Data:
Initial margin = .60
Maintenance Margin = .40
No interest on borrowed money (broker call)
No interest paid on holdings in Street Account
Stock Performance Data:
Initial Price = $62 per share
Price at the end of 80 days = $ 64.50
Dividend Paid
In Class Exercise
I.
Comparable Analysis
Data for Winston Inc.
Market
Price
$42
Trailing
EPS
$2
Benchmark
P/E
24
5-yr. Ave P/E
for Winston
20
5-yr. Ave P/E for
Benchmark
18
Expected EPS for
Winston
$2.20
Is the P/E for Winston high or low? Explain. Before
In-Class Exercise: Capital Allocation Line, Risk Aversion, and Optimal Passive Portfolios
1.) Use the data below to answer all parts of question #1 and #2
Data Based on Expectations:
Risk Free Rate
rf
Risk Premium
(rm rf)
2%
6%
Market Index
Return
rm
10%
1. Use the data given in the table below to answer all parts of this question.
Risk Free Rate
rf
2%
Expected Equity
Risk Premium
(rm rf)
6.5%
Analyst Expected Required Rate of
Return on Equity for Bear Inc.
6%
Bear Inc.
Adjusted
Beta
0.45
a.) Based on the
Quiz #2
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on this graded exercise.
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1. A Treasury bill with a face value of $1,000 sold for $995.50. The Treasury bill
matures i
Data To Use in the Exercise
Variance covariance matrix (diagonal measures are variances and off diagonal measures are covariances
A
B
C
Market
A
.09
.10
.12
.04
B
.10
.16
.16
.06
C
.12
.16
.25
.09
Market .04
.06
.09
.04
Expected Return
on the Market
11%
R