Please solve and explain
15-4 Suppose you win the Florida
lottery and are offered a choice of $500,000 in cash or
a gamble in which you
would get $1 million if a head is flipped but zero if a tail comes
up.
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Please solve and explain 15-4 Suppose you win the Florida lottery and are offered a choice of...
2. Expected returns Suppose you won the lottery and had two options: (1) receiving $1 million or (2) a gamble in which you would receive $2 million if a head were flipped but zero is a tail came up. a. What is the expected value of the gamble? b. Would you take the sure $1 million or the gamble? c. If you chose the sure $1 million, would that indicate that you are a risk averter or a risk seeker?...
1. Bond valuation Callaghan Motors' bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 5 percent. The bonds have a yield to maturity of 10 percent. What is the current market price of these bonds? 2. Expected returns Suppose you won the lottery and had two options: (1) receiving $1 million or (2) a gamble in which you would receive $2 million if a head...
Suppose you won the lottery and had two options: (1) receiving $2 million or (2) taking a gamble in which at the flip of a coin you receive $4 million if a head comes up but receive zero if a tail comes up What is the expected value of the gamble? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $550,000 should be entered as 0.55. ________ million Suppose the payoff was...
3. You have a risky portfolio that yields an expected rate of return of 15% with a standard deviation of 25%. Draw the CAL for an expected return/standard deviation diagram if the risk free rate is 5%. a. What is the slope of the CAL? b. If your coefficient of risk aversion is 5, how much should you invest in the risky portfolio? 4. A pension fund manager is considering three mutual funds. The first is a stock fund, the...
Consider the following information: Rate of Return if State Occurs Stock A Stock B State of Economy Recession Normal Boom Probability of State of Economy .15 .50 .35 .02. -.30 .18 .10 .15 .31 a. Calculate the expected return for the two stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation for the two stocks. (Do not round intermediate calculations and enter your answers...
Suppose that in 2019 the Federal Reserve Bank can take three actions with equal probability: 1) not increasing short-term interest; 2) increasing short-term interest rate moderately; 3) increasing short-term interest rate aggressively. Further assume that the returns on the stock market will be 10%, 8%, and 3% respectively in these three scenarios, and the returns on the bond market will be 4%, 6%, and 8% in these three scenarios. Suppose that you can only invest in either the stock market...
please answer both parts thankyou ! 1)Suppose you are the money manager of a $3.68 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $ 540,000 1.50 B 500,000 (0.50) C 940,000 1.25 D 1,700,000 0.75 If the market's required rate of return is 8% and the risk-free rate is 4%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal...
Suppose you have $200 with which you can buy shares of stock from two companies: ABC Hot Chocolate Company and XYZ Lemonade. Each company's stock currently sells for $100 per share. ABC hot chocolate company: If the temperature next year is lower than average, the interest rate will be 20%. There is a 50% chance that it will be colder than average next year. But if the temperature is warmer (50% chance), there is no returns from this stock. XYZ...
need to solve both questions and if both correct, I will give thumb You bought one of Rocky Mountain Manufacturing Co.'s 9 percent coupon bonds one year ago for $1,054.80. These bonds make annual payments and mature seven years from now. Suppose that you decide to sell your bonds today, when the required return on the bonds is 8.5 percent. If the inflation rate was 4.4 percent over the past year, what would be your total real return on the...
Please solve using financial calculator only and show work. Thank you. 28. Your brother has asked you to help him with choosing an investment. He has $5,200 to invest today for a period of five years. You identify a bank CD that pays an interest rate of 3.60 percent with the interest being paid quarterly. What will be the value of the investment in five years? 29. Tim has loaned money to his brother at an interest rate of 6...