'Investments Homeword\r'

'MGT 6080 Investments cooking 1 Note: Due time/ determine for this homework is 4:30pm on February 5. Please top online submission at T-square. 0. Today you bought 100 shares of rudiment Inc. at $100 per share. A yr from immediately ABC will carry a dividend of $2 per share for sure. The scathe of ABC a grade from now is uncertain and depends on the separate of the economy. A social class from now the economy will any be in a recession, a state of â€Å"normal” growth, or a boom with probabilities of 30%, 40%, and 30% respectively.After analyzing ABC you determine that the price of ABC a form from now in these various states of the economy will be: press out of the Economy Recession Normal Growth manna from heaven Price of ABC $80 $110 $ one hundred thirty What is the expected retort over the next twelvemonth to your investiture in ABC? What is the standard aberrance of that founder? 1. You are considering buying equity in a firm. If you purchase the equity, i n one year you will receive $1. 5 million with 40% probability and $1. 2 million with 60% probability. soon the yield on one year T-bills is 4%. Suppose that you require a risk aid of 10% to invest in the equity of this firm.In other(a) words, your minimum required relent on this investment is 14%. (a) What is the most you would be willing to pay for the equity? (b) If you pay this, what is the expected rate of bring back on your investment? (c) What is the standard release of the return to your investment in the firm? 2. Based on your examination of the historical record, you calculate that the expected return on the S&P500 over the next year is 6% over T-bills with a standard deviation of 15%. Currently a T-bill with one year to maturity and face value of $10,000 is selling for $9,615.You ache $1 million to invest and you will stage all of your money in some compounding of the S&P500 and one-year T-bills. Calculate the expected return and standard deviation of t hat return for 3 distinct portfolios. (a) Portfolio #1 is invested 100% in the S&P500. (b) Portfolio #2 is invested 50% in the S&P500. (c) Portfolio #3 is invested 10% in the S&P500. 3. Do the following recommended problems. (You go into’t have to submit the solution for this part. ) shutdown of chapter problem sets in your textbook, Investments by BKM Chapter 2: Chapter 3: 6, 9, 11 9, 16, 17\r\n'