Hi Tutor, I would appreciate if you could help with these assignment. This assignment "should be be solved by Ajkaushal’. Thanks, Torch

Hi Tutor,

I would appreciate if you could help with these assignment. This assignment “should be be solved by Ajkaushal’.

Thanks,

Torch

Attachment 1

Attachment 2

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Problem 7.4 (Essay)

1.

Describe the general relation between risk and return that we observe in the historical bond and stock

market data.

Problem 7.14

2.

The distribution of grades in an introductory finance class is normally distributed, with an expected grade of

69. If the standard deviation of grades is 9, in what range would you expect 95 percent of the grades to

fall?

(Round answer to 2 decimal places, e.g. 15.25.)

Number of Standard

Deviations

Fraction of

from the Mean

Total Observations

1.000

68.26%

1.645

90%

1.960

95%

2.575

99%

(Hint: Think in terms of what the expected highest and lowest scores would be for 95% of the students taking

the exam.)

Range

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Problem 7.20

3.

Given the returns and probabilities for the three possible states listed below, calculate the covariance

between the returns of Stock A and Stock B. For convenience, assume that the expected returns of Stock A

and Stock B are 12.10 percent and 18.40 percent, respectively.

(Round answer to 4 decimal places, e.g.

0.0768.)

Probability

Return(A)

Return(B)

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Good

0.35

0.30

0.50

Ok

0.51

0.10

0.10

Poor

0.14

-0.25

-0.30

Covariance

Problem 7.24

4.

Damien knows that the beta of his portfolio is equal to 1, but he does not know the risk-free rate of return or

the market risk premium. He also knows that the expected return on the market is 8 percent. What is the

expected return on Damien’s portfolio?

Expected return

%

Problem 7.26

5.

The market risk premium is 9.00 percent, and the risk-free rate is 4.80 percent. If the expected return on a

bond is 10.30 percent, what is its beta?

(Round answer to 2 decimal places, e.g. 15.25.)

Beta (

β

bond

)

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Problem 8.2

1.

Pierre Dupont just received a cash gift from his grandfather. He plans to invest in a

five-year bond issued by Venice Corporation that pays an annual coupon of 5.02

percent. If the current market rate is 7.66 percent, what is the maximum amount

Pierre should be willing to pay for this bond?

(Round answer to 2 decimal places,

e.g. 15.25.)

Pierre should

pay

$

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2.

Problem 8.12

Four years ago, Lisa Stills bought six-year, 10.66 percent coupon bonds issued by the Fairways

Corp. for $947.68. If she sells these bonds at the current price of $903.79, what will be her

realized yield on the bonds? Assume similar coupon-paying bonds make annual coupon

payments.

(Round answer to 2 decimal places, e.g. 15.25%.)

Realised rate of return

%

Problem 8.16

3.

Rockne, Inc., has outstanding bonds that will mature in six years and pay an 8 percent

coupon semiannually. If you paid $1,059.86 today and your required rate of return

was 6.15 percent.

What is the worth of the bond?

(Round intermediate calculations to 4 decimal places, e.g.

1.2514 and final answer to 2 decimal places, e.g. 15.25.)

Worth of the bond

$

Did you pay the right price for the bond?

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Problem 8.22

4.

Adrienne Dawson is planning to buy 10-year zero coupon bonds issued by the U.S.

Treasury. If these bonds have a face value of $1,000 and are currently selling at

$427.55, what is the expected return on them? Assume that interest compounds

semiannually on similar coupon paying bonds.

(Round intermediate calculations to

4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

Effective rate of return

%

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Problem 9.6

5.

Nynet, Inc., paid a dividend of $3.85 last year. The company’s management does not

expect to increase its dividend in the foreseeable future. If the required rate of return

is 16.5 percent, what is the current value of the stock?

(Round answer to 2 decimal

places, e.g. 15.25.)

Current

value

$

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Problem

9.8

6.

Ron Santana is interested in buying the stock of First National Bank. While the bank

expects no growth in the near future, Ron is attracted by the dividend income. Last year

the bank paid a dividend of $6.29. If Ron requires a return of 16.5 percent on such stocks,

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