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##### unit 5 case problem

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Question;Unit 5 ? Characterizing and Estimating Risk and Return;Unit 5 ? Characterizing and Estimating Risk and Return;Solve the;following using The Rule of 72.;1. You expect;to earn 8% per year on your investment. If you invest $3000 today, how much;will your investment be worth in 9 years?;2. You want to;have $40,000 available to finance a trip around the world in 12 years. You;estimate that you can earn 12% on your investment. How much do you need to;deposit today to meet your goal?;3. A new Grady;White fishing boat cost $5000 in 1979. Today, the very same boat costs around;$40,000. Estimate the average annual inflation rate, using the Rule of 72.;4. You invest;$2000 today and expect to earn 9% per year. How many years will it take for;your investment to grow to $32,000?;Chapter 9;Problems;9-1 Investment Return. FedEx Corp. stock;ended the previous year at $103.39 per share. It paid a $0.35 per share;dividend last year. It ended last year at $106.69. If you owned 300 shares of;FedEx, what was your dollar return and percent return? (LG9-1);9-2 Investment Return. Sprint Nextel Corp. stock ended the previous year at $23.36;per share. It paid a $2.37 per share dividend last year. It ended last year at;$18.89. If you owned 500 shares of Sprint, what was your dollar return and;percent return? (LG9-1);9-7 Risk versus Return.Rank the following;three stocks by their risk-return relationship, best to worst. Rail Haul has an;average return of 12 percent and standard deviation of 25 percent. The average;return and standard deviation of Idol staff are 15 percent and 35 percent, and;of Poker-R-Us are 9 percent and 20 percent. (LG9-4);9-8 Risk versus return.Rank the following;three stocks by their risk-return relationship, best to worst. Night Ryder has an;average return of 13 percent and standard deviation of 29 percent. The average;return and standard deviation of WholeMart are 11 percent and 25 percent, and;of fruit fly are 16 percent and 40 percent. (LG9-4);9-15 Average return.The past five monthly;returns for Kohls are 3.54 percent, 3.62 percent;-1.68 percent;9.25 percent, and -2.56 percent. What is the average monthly return? (LG9-1);9-16 Average Return. The past five monthly;returns for PG&E are -3.17 percent, 3.88 percent, 3.77 percent, 6.47 percent;and 3.58 percent. What is the average monthly return? (LG9-1);9-23 Portfolio Weights.If you own 300;shares of Alaska Air at $42.88, 350 shares of Best Buy at $51.32 shares of Liz;Claiborne at $44.73, what are the portfolio weights of each Stock?;(LG9-7);9-24 Portfolio Weights.If you own 400;shares of Xerox at $17.34, 500 shares of Qwest at $8.15, and 350 shares of Liz;Claiborne at $44.73, what are the portfolio weights of each stock?(LG9-7);Chapter 10;Problems;10.1 Expected Return.Computed the expected;return given these three economic states, their likelihoods, and the potential;returns: (LG10-1);Economic State Probability Return;Fast;growth 0.2 40%;Slow;growth 0.4 10;Recession 0.4 -25;10-2 Expected Return.Compute the expected;return given these three economic states, their likelihoods, and the potential;return, (LG10-1);Economic State Probability Return;Fast;growth 0.2 35%;Slow;growth 0.6 10;Recession 0.2 -30;10-7 CAPM Required Return.Hastings;Entertainments has a beta of 0.24. If the market return is expected to be 11;percent and the risk- free rate is 4 percent, what is Hasting?s required;return? (LG10-3);10.8 CAMP Required Return.Nanometrics Inc.;has a beta of 3.15. If the market return is expected to be 10 percent and the;risk-free rate is 3.5 percent, what is Nanometrics? required return? (LG10-3);10-11 Portfolio Beta.You have a portfolio;with a beta of 1.35. What will be the new portfolio beta if you keep 95 percent;of you money in the old portfolio and 5 percent in a stock with a beta of 0.78?;(LG10-3);10-15 Required Return.Paccar?s current stock;price is $73.10 and it is likely to pay a $2.69 dividend next year. Since;analysts estimate Paccar will have an 11.2 percent growth rate, what is its;required return? (LG10-7);10-17 Expected Return Riskfor the same;economic state probability distribution in problem 10-1, determine the standard;deviation of the expected return. (LG10-1);Economic state Probability Return;Fast;growth 0.2 40%;Slow;growth 0.4 10;Recession;0.4 -25;10-18 Expected Return Risk.For the same;economic state probability distribution in problem 10-2, determine the standard;deviation of the expected return. (LG10-1);Economic State Probability Return;Fast;growth 0.2 35%;Slow;growth 0.6 10;Recession 0.2 -30

Paper#47870 | Written in 18-Jul-2015

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