Homework Answers
- Systematic risk ,is the risk that a security faces due to the market changes. This risk is not diversifiable and affects the overall market it affects all securities, not just particular stocks. For example, the interest rates and inflation are forms of systematic risk. This type of risk is both unpredictable and impossible to completely avoid
- A risk seeking investor would pay the highest price for a a stock as these investors do not like very predictable and certain events instead they like uncertain outcomes more and would prefer taking risks by paying higher prices for the stocks irrespective of the direction the stock might take next.
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Know and be able to recognize systematic risk. Which type of investor would pay the highest price...
The scroll down options are 1. systematic/unsystematic risk 2. systematic/unsystematic risk 3. standard deviation/risk aversion 4....
The scroll down options are
1. systematic/unsystematic risk
2. systematic/unsystematic risk
3. standard deviation/risk aversion
4. correlation coefficient/diversification
Risk is the potential for an investment to generate more than one return. A security that will produce only one known return is referred to as a risk- free asset, as there is no potential for deviation from the known expected outcome. Investments that have the chance of producing more than one possible outcome are called risky assets. Risk, or potential variability...
The price of a share of stock is currently $50. The stock does not pay any...
The price of a share of stock is currently $50. The stock does not pay any dividend. At the end of three months it will be either $60 or $40. The risk-free interest rate is 5% per year. An investor buys a European put option with a strike price of $50 per share. Assume that the option is written on 100 shares of stock. What stock position should the investor take today so that she would hold a riskless portfolio...
1. As an investor, you are considering an investment in the bonds of the Conifer Coal Company. The bonds, which pay in...
1. As an investor, you are considering an investment in the bonds of the Conifer Coal Company. The bonds, which pay interest semiannually, will mature in eight years, and have a coupon rate of 9.5% on a face value of $1,000. Currently, the bonds are selling for $872. If you required return is 11% for bonds in this risk class, what is the highest price you would be willing to pay? b. What is the yield to maturity on these...
10) Standard deviation measures which type of risk? 10) A) Economic B) Total C) Systematic D)...
10) Standard deviation measures which type of risk? 10) A) Economic B) Total C) Systematic D) Unsystematic E) Non diversifiable issued by JW 11) 11) The bond market requires a return of9.8 percent on the five-year bonds Industries. The 9.8 percent is referred to as which one of the following? A) Face rate B) Coupon rate C) Call rate. D) Yield to maturity. E) Current yield. 12) What are the distributions of either cash or stock to shareholders by a...
Assume that you are only concerned with systematic risk. Which of the following would be the...
Assume that you are only concerned with systematic risk. Which of the following would be the best measure to use to rank order funds with different betas based on their risk-return relationship with the market portfolio? (a) Sharpe ratio (b) Jensen’s alpha (c) Treynor ratio (d) Sortino ratio
An investor is considering the purchase of a share of the Utah Mining Company. The stock...
An investor is considering the purchase of a share of the Utah Mining Company. The stock will pay a $4.69 dividend per year, beginning one year from today. This dividend is expected to grow at 11.39% per year for the foreseeable future. The investor thinks that the required return on the stock is 15% per year, based on her assessment of its risk. Based on this information, what is the price of one share of Utah Mining Stock? Do not...
which stock would be preferable to an investor with strong risk appetite. Historical Mean Returns 25%,...
which stock would be preferable to an investor with strong risk appetite. Historical Mean Returns 25%, historical standard deviation 30%; or historical mean returns 10%, historical standard deviation 30%; or historical mean returns 10%, historical standard deviation 5%
An investor is considering the purchase of a share of the Utah Mining Company. The stock...
An investor is considering the purchase of a share of the Utah Mining Company. The stock will pay a $4.95 dividend per year, beginning one year from today. This dividend is expected to grow at 10.79% per year for the foreseeable future. The investor thinks that the required return on the stock is 15% per year, based on her assessment of its risk. Based on this information, what is the price of one share of Utah Mining Stock? Hint: apply...
An investor is considering the purchase of a share of the Utah Mining Company. The stock...
An investor is considering the purchase of a share of the Utah Mining Company. The stock will pay a $3.13 dividend per year, beginning one year from today. This dividend is expected to grow at 8.58% per year for the foreseeable future. The investor thinks that the required return on the stock is 15% per year, based on her assessment of its risk. Based on this information, what is the price of one share of Utah Mining Stock? Hint: apply...
What should an investor pay for a common stock of PNB Corp. which has no growth...
What should an investor pay for a common stock of PNB Corp. which has no growth opportunities but pays annual dividends of $1.35 per share, while the required rate of return is 12.5%.
The scroll down options are
1. systematic/unsystematic risk
2. systematic/unsystematic risk
3. standard deviation/risk aversion
4. correlation coefficient/diversification
Risk is the potential for an investment to generate more than one return. A security that will produce only one known return is referred to as a risk- free asset, as there is no potential for deviation from the known expected outcome. Investments that have the chance of producing more than one possible outcome are called risky assets. Risk, or potential variability...
10) Standard deviation measures which type of risk? 10) A) Economic B) Total C) Systematic D) Unsystematic E) Non diversifiable issued by JW 11) 11) The bond market requires a return of9.8 percent on the five-year bonds Industries. The 9.8 percent is referred to as which one of the following? A) Face rate B) Coupon rate C) Call rate. D) Yield to maturity. E) Current yield. 12) What are the distributions of either cash or stock to shareholders by a...
An investor is considering the purchase of a share of the Utah Mining Company. The stock will pay a $4.69 dividend per year, beginning one year from today. This dividend is expected to grow at 11.39% per year for the foreseeable future. The investor thinks that the required return on the stock is 15% per year, based on her assessment of its risk. Based on this information, what is the price of one share of Utah Mining Stock? Do not...
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