James Fromholtz is considering whether to invest in a newly formed investment fund. The fund's investment objective is to acquire home mortgage securities at what is hopes will be bargain prices. The fund sponsor has suggested to James that the fund's performance will hing on how the national economy performs in the coming year. Specifically, he suggested the following outcomes:    State of the Economy Probability Fund Return Rapid expansion and recovery 5% 100% Modest growth 45% 35% Continued Recession 45% 5% Falls into depression 5% -100% a. Based on these potential outcomes, what is your estimate of the expected rate of return from this investment opportunity? b. Would you be invested in such an investment? note that your money in one year if the economy callapses into the worst state or you double your money iif the economy enters into a rapid expansion.       (Hint calculate the Standard deviation and comment on the risk-return tradeoff)

High Growth Fund has a front load of 5% and expected return of 14.5%. Normal Fund has no load. And expected return of 13.8%. Which fund would you hold if you expect to hold the fund for 5 years? How about holding the fund for 10 years? Please show how to solve in excel

Answer the following lettered questions on the basis of the information in this table: a. If the interest-rate cost of funds is 8 percent, what will be the optimal amount of R&D spending for this firm?b. Explain why $20 million of R&D spending will not be optimal.c. Why won’t $60 million be optimal either?

(Related to Checkpoint 8.1) (Expected rate of return) James Fromholtz is considering whether to invest in a newly formed investment fund. The fund's investment objective is to acquire home mortgage securities at what it hopes will be bargain prices. The fund sponsor has suggested to James that the fund's performance will hinge on how the national economy performs in the coming year. Specifically, he suggested the following possible outcomes: a. Based on these potential outcomes, what is your estimate of the expected rate of return from this investment opportunity? b. Would you be interested in making such an investment? Note that you lose all your money in one year if the economy collapses into the worst state or you double your money if the economy enters into a rapid expansion. a. The expected rate of return from this investment opportunity is %. (Round to two decimal places) Data Table State of Economy Rapid expansion and recovery Modest growth Continued recession Falls into…

Expected return. Hull Consultants, a famous think tank in the Midwest, has provided probability estimates for the four potential economic states for the coming year. The probability of a boom economy is 12%, the probability of a stable growth economy is 16%, the probability of a stagnant economy is 52%, and the probability of a recession is 20%. Estimate the expected returns on the following individual investments for the coming year, Hint: Make sure to round all intermediate calculations answers you will type. What is the expected return of the stock investment? % (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Investment Stock Corporate bond Government bond Boom 27% 10% 9% Forecasted Returns for Each Economy Stable Growth 13% 7% 6% Stagnant 6% 6% 5% Recession - 15% 3% 2%

You have been asked to forecast the additional funds needed (AFN) for Houston, Hargrove, & Worthington (HHW), which is planning its operation for the coming year. The firm is operating at full capacity. Data for use in the forecast are shown below. However, the CEO is concerned about the impact of a change in the payout ratio from the 10% that was used in the past to 55%, which the firm's investment bankers have recommended. Based on the AFN equation, by how much would the AFN for the coming year change if HHW increased the payout from 10% to the new and higher level? All dollars are in millions.   Last year's sales = S0 $300.0 Last year's accounts payable $50.0 Sales growth rate = g 40% Last year's notes payable $15.0 Last year's total assets = A0* $500 Last year's accruals $20.0 Last year's profit margin = PM 20.0% Initial payout ratio 10.0%   Select the correct answer.   a. $34.4     b. $42.9     c. $37.8     d. $41.2…