Entries by Hannah Wangui

A risky firm considers buying risk-free (but low-yielding) government bonds.

December 1, 2020 in /by

<br/> -A risky firm considers buying risk-free (but low-yielding) government bonds. The CFO tells you that this is a dumb idea, because the expected (and realized) return on government bonds is lower than the corporate discount rate. Therefore the investment has a negative NPV. Explain -Consider 2 stocks with variance σ1^2 and σ2^2 and correlation […]

 

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Many people claim that the IRR rule assumes that cash flows are reinvested at the opportunity cost of capita

December 1, 2020 in /by

<br/> -Many people claim that the IRR rule assumes that cash flows are reinvested at the opportunity cost of capital. Is this true? -Explain the concept of alpha and why it makes sense to evaluate fund managers based on alpha. . Is this true? -Explain the concept of alpha and why it makes sense to […]

 

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Suppose you know the expected returns of two stocks with different betas.

December 1, 2020 in /by

<br/> -Suppose you know the expected returns of two stocks with different betas. Can you determine the risk-free rate? Can you determine the market premium? -According to the portfolio theory, why should all investor solely consider investing in the Tangency portfolio and the riskfree asset?   Looking for a Similar Assignment? Order now and Get […]

 

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dividend

December 1, 2020 in /by

The company just made a dividend payment. Next year’s (expected) dividend per share is $5 in t=1, then $7.5 in t=2, then $10 in t=3. After that, the expected dividend will grow forever at 2%. The appropriate discount rate is 12%. What is the fair market price of the stock?   Looking for a Similar […]

 

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