three (3) years are shown in Table 1 below. TABLE 1 Holistic Company Ltd. Healthy Treats BETA 1 2 STOCK PRICE STOCK PRICE Dividend Year Beginning End Dividend Beginning End Paid of Year of Paid of Year of Year Year 2019 $30 $35 $3.00 $20 $25 $0.80 2020 $35 $40 $1.50 $25 $38 $1.10 2021 $40 $45 $2.00 $38 $24 $0.50
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- James had an equity portfolio that contains $40,000 investment in Tesla (TSLA) and $60,000 investment in Microsoft (MSFT) since 2018. After seeing the stock market turmoil sparked by coronavirus, he contacted you and seek for some approaches to measure the expected losses of his portfolio. As his investment adviser, you decided to use the model building approach to measure the risk of James’ portfolio. What is the 10-day 97% value at risk for TSLA and MSFT, respectively?James had an equity portfolio that contains $40,000 investment in Tesla (TSLA) and $60,000 investment in Microsoft (MSFT) since 2018. After seeing the stock market turmoil sparked by coronavirus, he contacted you and seek for some approaches to measure the expected losses of his portfolio. As his investment adviser, you decided to use the model building approach to measure the risk of James’ portfolio. What is the 10-day 97% value at risk for the portfolio?You have a new job as a Financial Planning assistant. Your client wants to invest money in stocks, bonds, and treasuries that have the dividend yields shown in the table below. Your job is to allocate their money across these three investments such that the total dollars of stocks is at least $10,000 less than the total dollars in bonds plus treasuries. In addition, they have identified the maximum investment in each of those three investment types (also shown below). Maximize the dividends earned. Your answer will be the amount invested in Stocks (rounded to whole dollars). Use Scenario 3 Stocks: yield % Bonds: yield % Treasuries: yield % Stocks: $ max Bonds: $ max Treasuries: $ max Scenario 1 2.22 2.04 1.93 170,000 60,000 50,000 Scenario 2 1.71 1.98 1.88 400,000 180,000 200,000 Scenario 3. 1.14 3.03 2.08 410,000 300,000 75,000 Scenario 4 1.25 1.48 2.55 800,000 280,000 500,000
- Joe is a new investor and has been closely watching a company by the name of USA Ltd., a pharmaceutical company aiming to develop a coronavirus vaccine. Joe believes the following returns are possible in 2022 and has attached a probability to each potential outcome: Probability Possible Return .20 185.00% .30 83.50% .30 -5.00% .20 -100.00% c) Joe hired an experienced stock analyst, who advised Joe that based on his advanced modelling, the expected return and standard deviation for USA Ltd are at 7.50% and 45.00%, respectively. Using these new variables, detail the range of returns expected by investing in USA Ltd. at the 68% (one standard deviation) and 95% (two standard deviations) confidence levels. Show variables, calculation and a concluding statement in your response.You have a new job as a Financial Planning assistant. Your client wants to invest money in stocks, bonds, and treasuries that have the dividend yields shown in the table below. Your job is to allocate their money across these three investments such that the total dollars of stocks is at least $10,000 more than the total dollars in bonds plus treasuries. In addition, they have identified the maximum investment in each of those three investment types (also shown below). Maximize the dividends earned. Your answer will be the total Dividends earned (rounded to whole dollars). Use Scenario 2 Stocks: yield % Bonds: yield % Treasuries: yield % Stocks: $max Bonds: $max Treasuries: $ max Scenario 1 2.22 2.04 1.93 170,000 60,000 50,000 Scenario 2 1.71 1.98 1.88 400,000 180,000 200,000 Scenario 3 1.14 3.03 2.08 410,000 300,000 300,000 Scenario 4 1.25 1.48 2.55 800,000 750,000 500,000Natsano has at most $40,000 to invest in the common stocks of two companies. He estimates that an investment in Company A will yield a return of 10%, whereas an investment in Company B, which he feels is a riskier investment, will yield a return of 20%. If he decides that his investment in the stocks of Company A is to exceed his investment in the stocks of Company B by at least $20,000, determine how much he should invest in the stocks of each company to maximize the return on his investment. Company A $ Company B $ What is the maximum return? $
- Rachel is a financial investor who actively buys and sells in the securities market. Now she has a portfolio of all blue chips, including: $13,500 of Share A, $7,600 of Share B, $14,700 of Share C, and $5,500 of Share D. (a) Compute the weights of the assets in Rachel’s portfolio?(b) Find the geometric average return (c)Find the risk free rate of return (d)Find the expected rate of return of the portfolioViden, a financial advisor for high-net-worth individuals, is examining the portfolio of a client who has requested to reduce the risk of his portfolio which is currently populated only with stocks. The client needs an investment with regular cash flows to finance his daughter’s 4-year university education, as well as a short term fund to meet unexpected requirements in cash. (a) Determine what are the best asset classes to meet his needs, and discuss the reasons for your choice. (b) What will happen to the systematic risk of the client’s portfolio after the change?Rachel is a financial investor who actively buys and sells in the securities market. Now she has aportfolio of all blue chips, including: $13,500 of Share A, $7,600 of Share B, $14,700 of Share C, and$5,500 of Share D. Required:a) Compute the weights of the assets in Rachel’s portfolio? b) If Rachel’s portfolio has provided her with returns of 9.7%, 12.4%, -5.5% and 17.2% over the pastfour years, respectively. Calculate the geometric average return of the portfolio for this period. c) Assume that expected return of the stock A in Rachel’s portfolio is 13.6% this year. The riskpremium on the stocks of the same industry are 4.8%, betas of these stocks is 1.5 and the inflationrate was 2.7%. Calculate the risk-free rate of return using Capital Market Asset Pricing Model(CAPM). d) Following is forecast for economic situation and Rachel’s portfolio returns next year, calculate theexpected return, variance and standard deviation of the portfolio. State of economy…
- Rachel is a financial investor who actively buys and sells in the securities market. Now she has aportfolio of all blue chips, including: $13,500 of Share A, $7,600 of Share B, $14,700 of Share C, and$5,500 of Share D.Required:a) Compute the weights of the assets in Rachel’s portfolio? b) If Rachel’s portfolio has provided her with returns of 9.7%, 12.4%, -5.5% and 17.2% over the pastfour years, respectively. Calculate the geometric average return of the portfolio for this period. c) Following is forecast for economic situation and Rachel’s portfolio returns next year, calculate theexpected return, variance and standard deviation of the portfolio. State of economy Probability Rate of returnsMild Recession 0.35 - 5%Growth 0.45 15%Strong Growth 0.20 30%Rachel is a financial investor who actively buys and sells in the securities market. Now she has a portfolio of all blue chips, including: $13 500 of Share A, $7600 of Share B, $14 700 of Share C, and $5 500 of Share D. Required:a) Compute the weights of the assets in Rachel’s portfolio?b) If Rachel’s portfolio has provided her with returns of 9.7%, 12.4%, - 5.5% and 17.2% over the past four years, respectively. Calculate the geometric average return of the portfolio for this period. c) Assume that expected return of the stock A in Rachel’s portfolio is 13.6% this year. The risk premium on the stocks of the same industry are 4.8%, betas of these stocks is 1.5 and the inflation rate was 2.7%. Calculate the risk-free rate of return using Capital Market Asset Pricing Model (CAPM).d) Following is forecast for economic situation and Rachel’s portfolio returns next year, calculate the expected return, variance and standard deviation of the portfolio.State of economyMild Recession…Morgan is a financial advisor and he just received $10,000 from a client. Based on the client's risk tolerance, he plans to invest into two stocks only: Bridge Inc, and Water Corp. Specifically, 20% of money will be allocated to Bridge Inc., and the remaining 80% to Water Corp. Historical data shows that the standard deviation of returns is 25% and 8% for Bridge Inc. and Water Corp., respectively. In addition, the two stocks have a correlation coefficient of -0.25 (note the negative sign). Given the information above, the standard deviation of this portfolio will be_ O a) 5.48% O b) 0.50% O c) 7.07% O d) 6.50% e) Cannot be determined