If An investor is considering investing in two securities A and B which promise a return of (10+X)% and (20+X)%, respectively. The security A has a risk of 4 (on a scale of 0-10) while the other has a risk of 9. The investor has 71,00,000 available for investment and he expects an average return of at least (12+X)% and wants the average risk factor not to exceed 6. Formulae the problem as n LPP and determine graphically the optimal investment plan for the investor. X = last digit of your roll no.
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- 1. You have been äsked to estimate the probability of default of a manufacturing company, which has corporate bonds publicly traded. Please list two approaches you can potentially consider.Calculate the present value of a $1,000 zero-coupon bond with six years to maturity if the yield to maturity is 7%.A stock had annual returns of 3.6 percent, -8.7 percent, 5.6 percent and 12.5 percent over the past 4 years. Which one of the following best describes the probability that this stock will produce a return of 22 percent or more in a single year? a. less than 5 percent but greater than 2.5 percent b. less than 1.0 percent but greater than 0.5 percent c. less than 2.5 percent but greater than .5 percent d. less than 0.1 percent e. less than 0.5 percent but greater than 0.1 percent
- Consider two equity market investors. The first investor is a hedge fund manager that relies on very active trading, and borrows from investment banks in order to leverage their investment. Their remuneration depends on total base fee earned by their fund as a percentage of net assets under management, plus a yearly bonus based on returns generated above a hurdle rate. The second investor is a high net-worth individual who is investing for their own retirement, which they anticipate to occur in 10 years or more. Identify three dimensions of risk that are likely to have significantly different impact on thesetwo investors. Explain the nature of the difference. Suggest aspects that each investor might monitor in order to control the risks most relevant to them.Why might a manager intentionally classify a trading security as an available-for-sale security? Select one: O A. The manager may wish to prevent an increase in value from being reported in shareholders' equity. B. The manager may wish to prevent a decline in value from being reported in shareholders' equity. C. The manager may wish to prevent a decline in value from being reported on the income statement. D. The manager may wish to prevent an increase in value from being reported on the income statement.You are the owner of four Taco Bell restaurant locations. You have a business loan with Citizens Bank taken out 60 days ago that is due in 90 days. The amount of the loan is $70,000, and the rate is 9.5% using ordinary interest. You currently have some excess cash: $25,000. Due to situations beyond your control, you, as the owner, must make an immediate business decision now to pursue only one of these two choices:1) sending all of the $25,000 to Citizens Bank as a partial payment on your loan, or2) using the $25,000 to purchase serving supplies such as food containers, cups, and plastic dinnerware for your inventory. This is the last day to take advantage of the opportunity to save some money due to a special discount price that is "10% off" the normal cost of $25,000 for these items. Consider these calculations: (a) How much interest (in $) will you save on this loan if you make the partial payment and don't purchase the additional serving supplies? (Round your answer to two…
- Consider the following information for the Alachua Retirement Fund, with a total investment of $4 million. [5] Stock Investment Beta A $ 400,000 1.2 B 600,000 -0.4 C 1,000,000 1.5 D 2,000,000 0.8 The market required rate of return is 12 percent, and the risk-free rate is 6 percent. What is its required rate of return? Stock A has the following probability distribution of expected returns: [5] Probability Rate of Return 0.1 -15% 0.2 0 0.4 5 0.2 10 25 What is Stock A’s coefficient of variation? What is Stock T’s coefficient of…According to the Institute of Internal Auditors, risk is a combination of the probability of an event and its consequence and that consequences can range from positive to negative True or False?Sonia wich to esatablish a trust fund from which her son can withdraw $6,000 every six months for 15 years, when he reach 16 years old. At the end of which time he wil recevie the remaining money in the trust, which you would like to be $25,000. The trust will be invested at 6% per annum componded semi-annually. How large should the trust be?
- Suppose you are 45 and have a $410,000 face amount, 15-year, limited-payment, participating policy (dividends will be used to build up the cash value of the policy). Your annual premium is $1,435. The cash value of the policy is expected to be $16,400 in 15 years. Using time value of money and assuming you could invest your money elsewhere for a 7 percent annual yield, calculate the net cost of insurance. Use (Exhibit 1-A, Exhibit 1-B, Exhibit 1-C, Exhibit 1-D)The process of evaluating risk to make certain that the risk cost coverage is adequate to reduce the exposure to risk, is referred to as? Select one: a. Risk coverage b. Liquidity coverage c. Underwriting d. Risk poolingYour answer is partially correct. An independent contractor for a transportation company needs to determine whether she should upgrade the vehicle she currently owns or trade her vehicle in to lease a new vehicle. If she keeps her vehicle, she will need to invest in immediate upgrades that cost $5,200 and it will cost $1,300 per year to operate at the end of year that follows. She will keep the vehicle for 5 years; at the end of this period, the upgraded vehicle will have a salvage value of $3,800. Alternatively, she could trade in her vehicle to lease a new vehicle. She estimates that her current vehicle has a trade-in value of $9,800 and that there will be $4,100 due at lease signing. She further estimates that it will cost $2,900 per year to lease and operate the vehicle. The independent contractor's MARR is 11%. Compute the EUAC of both the upgrade and lease alternatives using the insider perspective. Click here to access the TVM Factor Table Calculator. 1943.56 EUAC(keep): $…