Financial Markets

Financial Markets (N13302) Mock Paper (2010/2011) challenge 1 (a) BSC Industries has near nonrecreational its annual dividend of $10 per bundle. The dividend is judge to grow at a constant evaluate of 5% indefinitely. The beta of BSC industries line of credit is 1.3, the riskless rate is 2%, and the market risk bounteousness is 7%. (1) What is the inherent value of the investment firm? (2) What would be your venture of intrinsic value if you believed that the stock was riskier, with a beta of 1.7? [40%] (b) CBD stock has an expect ROE of 15% per year, expect earnings per grapple of $6, and anticipate dividend of $4 per shargon. The beta of CBD stock is 1.3, the risk-free rate is 2%, and the market risk premium is 7%. What are its expected growth rate, its price, and its P/E ratio? [40%] (c) establish why P/E multiples are in superior general negatively correlated with risk and positively correlated with growth. [20%] Question 2 Mr. smith lacks to invest in two dispenses: treat X and share Y. Share X has an expected pass of 12% with a variance of 0.0096, and share Y has an expected return of 9% with a variance of 0.0081. regard the covariance between X and Y is -0.0034.

Calculate the expected return and normal deviation of his portfolio if he invests: (a) 40% in share X and 60% in share Y. ! [40%] (b) 70% in share X and 30% in share Y. [40%] (c) Calculate the correlation coefficient between X and Y. [20%] Question 3 a) Suppose your neighbour wants to invest in bails. 1 of the choices is a corporate bond with a coupon rate 2%, 2-year adulthood with comparability value of £1000 pay annual coupon payment. Suppose the interest rate is 1%. The other choice is a corporate bond 10-year maturity with par value of...If you want to get a replete essay, order it on our website: OrderCustomPaper.com

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