FINANCE ASSIGNMENT
Use the following info to solve the next questions:
Year Return
Ttk MAX
1 12 6
2 15 14
3 4 7
4 -5 0
5 9 13
1) Calculate the average return for TTK and MAX
a) 9% TTK; 6% MAX
b) 7% TTK; 8% MAX
c) 2% TTK; 7% MAX
d) -7% TTK; 7% MAX
2) Calculate the variance for TTK and MAX
a) .00245; .00021
b) .1252;.08542
c) .00012;.02156
d) .00615;.00325
3) Calculate the Standard Deviation for TTK and MAX
a) .078422;.05701
b) .005457;.000245
c) .01254;.001246
d) .011214;.021547
Use the following info to solve the next questions:
State of economy Probability Rate of return
WAK ALH
1 .20 .25 .18
2 .30 .10 .20
3 .50 .15 .04
4) What is the expected return for WAK and ALH?
A) 15.50% WAK;11.6% ALH
B) 15.56% WAK;11.6% ALH
C) 10.54% WAK; 11.8% ALH
D) 18.52% WAK; 9.5% ALH
5) What is the standard deviation for the two stocks?
a) 13.8%;7.9%
b) 5.6%;8.4%
c) 11.5%;13.9%
d) 6.5%;12.8%
Use the following info to solve the next questions:
EXPEXTED RETURN BETA
A 10.5 .90
B 13 1.15
C 14.5 1.2
RISK FREE 6 .00
Ps. Expected return for the market portfolio is 14%. Risk free = 6%
6) How much is the slope? A, B and C are 33.33% each. Use average Beta.
a) 5.2%
b) 3.9%
c) 7.4%
d) -5.3%
7) What is the market premium?
a) 8%
b) 6%
c) 2%
d) ZERO
8) You are considering two investments. You note that the return on investment A tends to vary quite widely from its average, definitely more so than does investment B. Based on this, you believe that:
A)
A has a higher return volatility than B.
B)A has a lower standard deviation than B.
C)A has a higher inflation premium than B.
D)A has a lower variance than B.
E)A must be one of the 300 largest stocks listed on the TSE, while B must be a small capitalization Canadian stock.
9) What is the IRR of a project with a cash outflow of $600 in year 0, followed by yearly cash inflows of $200, 200, and $400?
10)
A (-2,000, 500, 600, 700, 800)
B (-2,000, 950, 850, 400, 300)
If A and B are mutually exclusive and required rate of return of 5%, which project should be accepted?
11) You have the following information about returns of two securities. Asset X and Asset Y. Each return has an equal probability of occurring.
X Y
11% -3%
9% 15%
25% 2%
7% 20%
Calculate the standard deviation for both.
12) Explain the unsystematic risk:
13) What is the CAPM saying? Explain
14) If the two firms compete in the same market, the acquisition is called ...............acquisition. A reorganization of firms at different stages of production process is ................acquisition. Acquisition involving firms in unrelated lines of business are called..............acquisitions.
15) The transfer of control of a firm from one group to another is called.................; the acquiring firm makes an offer to pay cash or securities in order to acquire the target firm. A takeover can occur by acquisition or in two alternative ways. First way is called..............and second way is called..............
16) The payback period is the amount of time required to recover the...............for the capital budgeting project from the future...............produced by the project. The payback period rule specifies that an investment is...............if the payback period is less than a specified...............