You have $1,000 to invest and are considering buying some
combination of the shares of two companies, Donkey Inc and Elephant
Inc. Shares of Donkey Inc will pay a 10 percent return if the
Democrats are elected, an event you believe to have a 60 percent
probability; otherwise the shares pay a zero return. Shares of
Elephant Inc will pay 8 percent if the Republicans are elected (a
40 percent probability), zero otherwise. Either the Democrats or
the Republicans will be elected.
a)What is your expected return if you invest $500 in each stock?
(Hint: Consider what your return will be if the Democrats win and
if the Republicans win, then weight each outcome by the probability
that event occurs.)
B) Devise an investment strategy that is riskless, that is, one in which the return on your $1,000 does not depend at all on which party wins.
Invest $ ______in ElephantInc and $ ______in DonkeyInc.
You have $1,000 to invest and are considering buying some combination of the shares of two...
You have $1,500 to invest and are considering buying some combination of the shares of two companies, DonkeyInc and ElephantInc. Shares of DonkeyInc will pay a return of 12 percent if the Democrats are elected, an event you believe to have a 25 percent probability; otherwise the shares pay a zero return. Shares of ElephantInc will pay 10 percent if the Republicans are elected (a probability of 75 percent), zero otherwise. Either the Democrats or the Republicans will be elected....
Chapter 11 Homework You have $500 to invest and are considering buying some combination of the shares of two companies, Donkeyinc and Elephantine. Shares of Dort will pay a return of percent of the Democrats are elected an event you believe to have a 20 percent probability otherwise the shares pay a zero retum. Shares of Elephantine will pay 6 percent of the Republicans are elected a probability of 80 percener otherwise her the Democrats of the Republicans will be...
Question 4 [5 points] You have $1000 to invest and are considering buying some combination of the shares of two companies, Elephantinc and Lioninc Shares of Elephantinc will pay a 5 percent return if the Conservatives are elected an event you believe to have a 60 percent probability, otherwise the shares pay a zero return. Shares of LionInc will pay 10 percent if the Liberals are elected (a 40 percent probability), zero otherwise. Either the Liberals or the Conservatives will...
You have $1,200 to invest and are considering buying some combination of the shares of two companies, DonkeyInc and ElephantInc. Shares of DonkeyInc will pay a return of 8 percent if the Democrats are elected, an event you believe to have a 30 percent probability; otherwise the shares pay a zero return. Shares of ElephantInc will pay 6 percent if the Republicans are elected (a probability of 70 percent), zero otherwise. Either the Democrats or the Republicans will be elected. ...
You Invest $3000 by buying 100 shares of Driss Inc at a price of $30 per share. One year from now, Driss pays you a dividend of 55 cents per share. One year later (i.e. two years from now), you sell your shares for $32. What return (IRR) did you get on your investment? (Do not round intermediate calculations. Report your result as a percentage. Round the final answers to 2 decimal places. Omit the % sign in your response....
Imagine you have $10,000 that you want to invest and you want to invest in some bonds. *You would be looking at the coupon rate (which is the interest rate that it will pay) since you want to get the highest return on your investment *You would also be looking at the risk rating to make sure it is not too risky or you might lose your money if the company gets into trouble financially. choose any company Example Microsoft...
Please show work
1. You are considering buying equity in a firm. If you purchase the equity, in one year you will receive $1.5 million with 40% probability and $1.2 million with 60% probability Currently the yield on one year T-bills is 4%. Suppose that you require a risk premium of 10% to invest in the equity of this firm. In other words, your minimum required return on this investment is 14%. (a) What is the most you would be...
13. You are considering buying shares of stock in the Steel Mill. The forecast for the firm is steady growth over the next decade. The firm just paid its annual dividend of $1.42 per share and has plans to increase that amount by 4 percent annually indefinitely. You require a 12.5 percent return on this type of security. What is your estimate of the value of this stock ten years from now? A. $24.13 B. $24.38 C. $24.73 D. $25.06...
2. You have $200,000 to invest in Stock D, Stock E, and a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 15 percent If D has an expected return of 18 percent and a beta of 1.50, E has an expected return of 15.2 percent and a beta of 1.15, and the risk-free rate is 6 percent, and if you invest $60,000 in Stock D, how...
2. You have $200,000 to invest in Stock D, Stock E, and a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 15 percent If D has an expected return of 18 percent and a beta of 1.50, E has an expected return of 15.2 percent and a beta of 1.15, and the risk-free rate is 6 percent, and if you invest $60,000 in Stock D, how...