Given the following information, what is the variance of the returns on this stock? State of Economy Probability of State of Economy .30 Rate of Returm Boom .18 Normal Recession .65 .11 -.06 .05

Q: Peter graduated at the end of 2017 and he received then a gift of 12 000 € which he deposited on his…

A: Amount received as gift = 12,000 Annual saving = 5,400 Interest rate = 1.55% Tax rate = 30%

Q: If the cost of capital is 12%, how much should the company set aside on an annual basis II they…

A: Sinking funds are periodic payments done so that they are equivalent to future requirements of money…

Q: mpare bond a is giving you 10 % return and municipal bond b is giving you 8 % return . your marginal…

A: Municipal bonds are tax free bond and corporate bonds are not tax free and so can compare the after…

Q: Explain the followings:                          a.    Floating Exchange Rates  b.    Pegged or…

A: The price of a country's currency in reference to the currency of another country. When countries…

Q: Consider a 25​-year mortgage of ​$100,000 at 6.6​% interest compounded monthly where the loan is…

A: Data given: Mortgage amount = $100,000 Interest rate compounded monthly= 6.6%/12= 0.0055…

Q: Use the following information to calculate the change in value that would result if the benchmark…

A: Given :- Current food cost - 29.2% Benchmark food cost - 28.5% Target reduction in cost - 0.7%…

Q: 1,6 billion gallons are sold every year, in over one hundred and sixty countries.  The drink was…

A: Coca - Cola Cold drink was invented by Dr. John Pemberton in Atlanta. Name given by Frank Robison.…

Q: When the economy is weak, money is spent freely on needs and wants. True False

A: An economy is a large set of interrelated production, consumption, and exchange activities that help…

Q: QUESTION FIVE You are considering investing in a new project called Lolis with the following Annual…

A: Capital Budgeting: Capital budgeting  arrives at conclusions about the long-term investment of an…

Q: If money is invested at an interest rate of 5.7 percent per year, find the annual percent yield…

A: Effective yield or the APY takes into consideration the number of times compounding is done in a…

Q: Assume you buy a March 1625 point FBM-KLCI call option for $25 and hold until expired. Draw an…

A: In the given case, Call option is purchased at a premium of $25 Long call is exercised only if Stock…

Q: AL Enterprises purchases P4,562,500 in goods per year from its sole supplier on terms of 2/15, net…

A: Discount rate = 0.02 (i.e. 2%) Allowed payment days = 50 Discount days = 15

Q: An asset is planned to be purchased with an initial value of $400,000 and an estimated salvage value…

A: Discounting is a technique which is used to compute the present value (PV) of future cashflows by…

Q: t year-end 2021, Wallace Landscaping's total assets, all of which are used in operations, were $2.34…

A: Company need to raise money for long term growth in sales but some can be arranged internally but…

Q: An engineering analysis by net present worth (NPW) s to be made for the purchase of two devices A…

A: NPV is the difference between the Present Value of Cash Inflows and Initial Investment. A project…

Q: When your need for learning never ends,it is called, O love of learning O learning is fun O lifelong…

A: Because the term "learning" is frequently used in debates about teaching in higher education, it's…

Q: ) Discuss the potential sources of synergy, should a company acquire another company. Incorporate…

A: An acquisition is the purchase of most or all of the shares of one company in order to gain control…

Q: Arnold Inc. is considering a proposal to manufacture high-end protein bars used as food supplements…

A: Initial Investment  $    1,50,00,000.00 Sales revenue  $       50,00,000.00 Manufacturing costs…

Q: a P5,000,000 loan to be credited to ABC on May 1, 2022. The prevailing interest rate on Jan. 31 was…

A: Forward rate agreements(FRA) are interest rate derivatives. This is an instrument used by…

Q: The following financial information was provided by Anya Company: Net Income      8,255,000.00…

A: Net profit margin depends on sales and net income and all these are quite interrelated to each…

Q: Find the annual equivalent (A) of a gradient series at 10%: End of year 1 3 4 Net Cash Flow ($) 100…

A: Annual equivalent is annual cash flow that is equivalent to future cash flow that is possible from…

Q: Happy Printers Ltd is evaluating four mutually exclusive projects which are competing for the same…

A: Here,

Q: The depreciation expense is generally estimated based on some assumption such as percentage of sales…

A: Depreciation can be defined as the reduction in the value of the asset over a period of time due to…

Q: a 0.07248 b. 0.00386 0.26921

A: Portfolio management is the process of selecting, prioritising, and controlling an organization's…

Q: Use the information below provided by Angel Baby Angel Company: Sales     8,250,000.00 Operating…

A: EVA is the economic value added which is calculated using the following formula.

Q: Arthur is deciding to make end-of-year deposits of P1,200 per year. What rate of return would enable…

A: Future Value: The future value is the amount that will be received at the end of a certain period.…

Q: 18. You are borrowing $700,000 for 30 years at 6% annually. The lender is charging you a 2 point…

A: Effective interest rate simply means annual interest rate. It contrasts the interest rates of two…

Q: To create a fund of P1,000,000, how many deposits of P48,000 must be placed at the beginning of each…

A: Accumulated fund (AF) = P1,000,000 Monthly deposit (m) = P48,000 Monthly interest rate (r) = 0.005…

Q: At the age of 25 Riley starts saving for retirement. If his investment plans pay an APR of 6%…

A: We will use the concept of time value of money here. As per the concept of time value of money the…

Q: college student wants to celebrate graduating and getting a job by spending $5,000 on a trip to Bali…

A: First we need to calculate annual Installments to be paid Solved using Financial Calculator  N = 5…

Q: B. What are the strength and weaknesses of each of the following capital budgeting technique below?…

A: Capital budgeting techniques are used for assessing the net benefits from projects and the value…

Q: How much are you willing to pay today for one share of stock if the company just paid a $1.85 annual…

A: Last dividend = $1.85 Growth rate = 0.06 Required return = 0.14 Stock price = ?

Q: Jack is a very successful manager. He has a management contract which grants him a lump sum payment…

A: Future value of a present value is the value of that amount after taking into account the time value…

Q: (a) Samson told you that the company's pre-tax cost of debt is 5.7%, calculated by annual coupon…

A: Number of bonds = 12,000 Semi-annual coupon payment = $28.5 Time of maturity = $1,000 Corporate tax…

Q: Cross-Rates 1€=$1.75, 1£=$1.75 Is there an arbitrage opportunity if €=£1? Yes ONo

A: Solution:- Arbitrage means an opportunity to earn something without investing even a penny of money…

Q: Your father is about to retire, and he wants to buy an annuity that will provide him with $85,000 of…

A: Present Value:  The present value is the value of cash flow stream or the fixed lump sum amount at…

Q: Consider the following investment in CURRENT DOLLARS The trem (minimum acceptable rate of return), m…

A: Real rate is the rate which excludes the impact of inflation in the economy, while nominal rates are…

Q: Lobster Seafood Corp. is planning to build a new shipping depot. The initial cost of the investment…

A: The cost of capital is the amount of return that the company pays for its capital. The net present…

Q: 13 Suppose you sold stock XYZ December RM8 call options for 40 sen. The price of XYZ stock on the…

A: Call Options: It is the  financial contracts that  give the choice purchaser the right however not…

Q: Assuming that money is worth 10%, compute the present value of: 1. $14,000 received 15 years from…

A: Present Value: It represents the present worth of the future amount and is computed by discounting…

Q: Deli is a risk-analyst at Nkumbu Bank (NB), a commercial bank with operations in Zambia. NB is…

A: Value at Risk (VaR) is a metric that measures the magnitude of potential financial losses inside a…

Q: Comment on the following statement. The reason we are seeing fewer market-creating innovations is…

A: The process by which a company evaluates potential big projects or investments is known as capital…

Q: Are traditional international business theories, such as the Uppsala model, still applicable to…

A: All foreign markets are markets other than your own. Sales in foreign markets include addressing a…

Q: A student plan to deposit $2,000 in the bank now and another $4,000 for the next 3 years. If he…

A: Effective interest rate is 8% Amount deposited now is $2,000 Amount deposited for next three years…

Q: A home appliance manufacturing company plans to invest what it considers "temporary excess fund" in…

A: The present value of the bond is the price that the buyer has to pay to obtain the bond today. The…

Q: Calculate the amount financed, the finance charge, and the total deferred payment price (in $) for…

A: Solution:- When a loan is taken, it can either be repaid as a lump sum payment or in installments.…

Q: Determine Teague Co.'s operating leverage. Round your answer to one decimal plac

A: Operating leverage is an important concept in finance. It shows the degree to which a firm can…

Q: 2. Calculate the IRR for the following project with the following cash flows: An initial outflow of…

A: Year Cash flow 0 -47104 1 16000 2 17000 3 18000

Q: 4) Jones purchased a perpetuity today for 7000. He will receive the first annual payment of 200 five…

A: Price of perpetuity = Present value of perpetuity = 7000 First payment after 5 years = 200 Every…

Q: Make 2 IRR problems with a diagram and solution.

A: IRR or Internal rate of return :- It is an discount rate at which initial investment is equal to sum…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.