Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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2. I need help with multiple choice finance home work question
Due to the ___________, the total
Real rate of return.
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- You are concerned about the market volatility but have found stocks that are attractively priced. In additionto cash, your portfolio will have securities both on the LONG and SHORT sides. You want to set up your LONG/SHORT portfolio with some constraints. You will set aside 12.27% of the equity as a cash reserve to cushion any adverse margin changes and to pay any associated fees. You will maximize your buying and selling power (i.e. what you can purchase and sell on margin) using the remaining equity and loans from the broker. Your account's beginning equity is $201,290 all in cash before you start trading. You will set up your 100% beta-neutral trade on full margin, and the margin requirements are 50% on both sides. Assume that the LONG side has a weighted average beta of 1.35, while the SHORT side has a weighted average beta of 1.00. What is the value of your account's total liabilities immediately after you set up the portfolio? O $250,234 $257,185 $264,136 $271,087 $278,038arrow_forwardwhich one is correct please confirm? QUESTION 25 The constant growth valuation model approach to calculating the cost of equity assumes that ____. a. earnings, dividends, and stock price will grow at a constant rate b. the growth rate is greater than or equal to ke c. earnings and dividends grow at a constant rate, but stock price growth is indeterminate d. dividends are constantarrow_forwardRate of return, standard deviation, coefficient of variation Personal Finance Problem Mike is searching for a stock to include in his current stock portfolio. He is interested in Hi-Tech Inc.; he has been impressed with the company's computer products and believes Hi-Tech is an innovative market player. However, Mike realizes that any time you consider a technology stock, risk is a major concern. The rule he follows is to include only securities with a coefficient of variation of returns below 1.00. Mike has obtained the following price information for the period 2015 through 2018: Hi-Tech stock, being growth-oriented, did not pay any dividends during these 4 years. a. Calculate the rate of return for each year, 2015 through 2018, for Hi-Tech stock. b. Assume that each year's return is equally probable and calculate the average return over this time period. c. Calculate the standard deviation of returns over the past 4 years. (Hint: Treat this data as a sample.) d. Based on b and c…arrow_forward
- 5arrow_forward6. What are the realized returns for the stock market, for Small Companies, Large Companies; long term Bonds, Long Term Gov Bonds, and US T Bills? What investment portfolio would select (do not include names of mutual funds or stocks, just overall types of investments.)?arrow_forwardHi can i calculate the value of a firm by discounting the Unlevered net incomes?arrow_forward
- of stion According to MM Case II, if the expected return on assets decreases, what happens to the expected return on equity? Select one: Oa increases O b. remains constant Oc decreases O d. depends on the firm's capital structure Time learrow_forwardA centerpiece of any study of finance is "valuation." A simple function, "V=l/R," can be used to describe an asset's "value." What does the "R" in that expression stand for? O a future cash flow O a current cash flow O a market-determined discount rate O a variable income measure O a measure of probabilityarrow_forwardDividend policy may be affected by firm level as well as macroeconomic level factors. Select FIVE variables (at least 2 firm-level factors/variables and at least 2 macroeconomic factors/variables) from the list shown below. Explain and discuss the predicted impact of selected factors on dividend policy using relevant theories. i.e. what theories help to predict the positive or negative impact on the dividend payout and why. FIRM-LEVEL FACTOR/VARIABLE Asset growth rate Positive NPV investment opportunities Capital intensity of the production process Free cash flow generated Number of individual shareholders Relative tightness of ownership coalition Size of largest block holder MACROECONOMIC FACTOR/VARIABLE Transaction costs of security issuance Personal tax rates on dividend income Personal tax rates on capital gain Importance of institutional investors Corporate governance power of institutional investors Capital market, relative to intermediated (bank) financingarrow_forward
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