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Rakhi Vasavada
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Please could you help me out, with this 2 question, no citation

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Please could you help me out, with this 2 question, no citation from online just you opinion the link is : http://www.mediafire.com/view/?ccf27c8p60ybphj
Submitted: 2 years ago.
Category: Finance
Expert:  Rakhi Vasavada replied 2 years ago.

Dear Friend,

1-) A working capital shortage can cause a growing company to go bankrupt despite lots of profitable sales. Let's talk about the current liability side of our balance sheet. How would you go about getting vendors to sell to you without demanding COD or COO (cash on order) terms? How would you approach a banker for a working capital loan? Hint: perhaps you are seeing a use for the forecasting discussions we have had in earlier weeks?

The answer to this can be bit broad in nature. It is correct that incorrect planning of working capital requirement can harm or ruin even one of the most profitable companies, and thus, proper planning and getting of required amount of working capital assumes great important. Coming to the point, one of the most easy and flexible methods of addressing the need of working capital is to get “Vender Line of Credit”. To get vendors issue lines of credit, the company can adopt many methods. These include – company can promise them and give commitment of “guaranteed business” for a longer term if they give favorable terms. The company can also offer some price which is higher than the COD or COO up to the extent of cost of funds. Guaranteed business commitment and higher prices (limited to the extent of cost of funds) are the most important methods used to address working capital requirement from the vendors.

If Vendor Line of Credit is not available, then the second step is to approach banks for the working capital requirements. While approaching bank, the method would be slightly different. You need to have exact estimate of working capital requirements and for this, you will need your sales forecasting models in place which will, in turn, help you determine you r working capital requirements. While doing this, cash flows would also determine the requirement as the factors such as the credit that you extend to the customers and the credit / or not credit that you would get from your vendors would also count. So, a bank is approached after detail estimation of working capital requirements is done using sales forecasting methods.

 

2-)Continued New Topic: Let's assume you have a meeting with a potential new banker. Your company has had lots of profitable sales, but each month you have problems making payroll, and some of your vendors are threatening to put you on COD. (By the way, this was a true situation I faced with a manufacturing company I sold in 2005!)

How would your knowledge of your company's CCC give you a starting point for your loan request? What I am asking you to consider is what the CCC (from the other thread) tells you about your need for permanent NOWC?

CCC-Cash Conversion Cycles. – This is a great metric to understand and estimating your working capital requirements. This would help you strategically align your manufacturing, accounts payable, accounts receivable, and customer contract negations together. The key here is to know how quickly your company turns money into goods or services and goods or services into cash receipts. The calculation needed to arrive at this conclusion is called the Cash Conversion Cycle (CCC). Knowing this ratio is vital since it represents the number of days a firm’s cash is occupied with its operations.The CCC is especially important when determining the amount of external financing you may require to grow your company as opposed to using cash generated by the company to finance the growth.

To give a starting point of your loan request, you must begin with addressing CCC and making necessary alignments to make it as short as possible.

Coming to NOWC – Net Operating Working Capital. Net operating working capital is a financial metric used to measure operational liquidity of a business. This measure is calculated by subtracting all noninterest-bearing current liabilities from current assets required in production. Noninterest-bearing current liabilities include accounts payable and accruals, which are expenses that have accrued but have not been paid. Current assets required in production are essentially working capital.

In nutshell, while approaching for a working capital, one needs to determine the CCC, align it as much as it is possible and precisely determine NOWC so that one does not end up requesting or raising more working capital than required.

Hope this helps...
Warm Regards,

Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3906
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Rakhi Vasavada and other Finance Specialists are ready to help you
Customer: replied 2 years ago.

Please could you help me with these project it is due by Saturday: http://www.mediafire.com/view/?5g31m1iuay73x1y, Thank you

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

The below are the workings of all of your questions.

Hope this helps...

1-) Cash Management

Williams & Sons last year reported sales of $10 million and an inventory turnover ratio of 2. The company is now adopting a new inventory system. If the new system is able to reduce the firm’s inventory level and increase the firm’s inventory turnover ratio to 5 while maintaining the same level of sales, how much cash will be freed up?

Sales $10,000,000
Inventory Turnover ratio – Original = 2
Inventory Turnover ratio New Ratio = 5

Let us now Calculate the amount of Cash that will be freed up.

Inventory = Sales Inventory /Turnover Ratio
Old Inventory Value = $10,000.000 / 2 = $500,000

New Inventory Value = $10,000,000 / 5 = $200,000

FREED UP CASH = Old Inventory Value – New Inventory Value
= $500,000 - $200,000 = $300,000

=========================================================================

2-) Receivables Investment

Medwig Corporation has a DSO of 17 days. The company averages $3,500 in credit sales each day. What is the company’s average account receivable?

Accounts Receivable = 17 X $3,500

= $59,500

=========================================================================

3-) Cost of Trade Credit

What is the nominal and effective cost of trade credit under the credit terms of 3/15, net 30?

Nominal cost of Trade = discount percentage100- Discount Percentage x 365Days credit is Outstanding-Discount Period
=
= 397 X 36530-15
= 0.03093 x 24.33
=0.75263
=75.263%

4-) Cost of Trade Credit

A large retailer obtains merchandise under the credit terms of 1/15, net 45, but routinely takes 60 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer’s effective cost of trade credit?

Periodic rate = (Discount %) / 1 – Discount %
Periods per year = 360/(days allowed – discount period)
Effective cost of trade = (1 + periodic rate) periods per year – 1

1/15, net 45
Periodic rate = (Discount %) / 1 – Discount %

= 1/99 = 0.01

Periods per year = 360/(days allowed – discount period)

= 360 /(45 – 15)

= 12

Effective cost of trade = (1 + periodic rate) periods per year - 1

= (1.01)12 – 1 = 0.1268 or 12.68%

5-) Accounts Payable

A chain of appliance stores, APP Corporation, purchases inventory with a net price of $500,000 each day. The company purchases the inventory under the credit terms of 2/15, net 40. APP always takes the discount but takes the full 15 days to pay its bills. What are the average accounts payable for APP?

Average accounts payable = net inventory per day x days in discount period = $500,000 x 15 = $7,500,000.

10 -) Corporate Valuation

The financial statements of Lioi Steel Fabricators are shown below—both the actual results for 2010 and the projections for 2011. Free cash flow is expected to grow at a 6% rate after 2011. The weighted average cost of capital is 11%.

  • a. If operating capital as of 12/31/2010 is $502.2 million, what is the free cash flow for 12/31/2011?

Free Cash Flows – FCF Acutal 2010 Projected 2011

Net Operating working capital 127.20 134.90
Net Plant & Equipment 375.00 397.50
Net Operating Capital (12/31/12) 502.20 532.40
Investment in Operating Cap. 30.20

NOPAT EBIT*(1-tx rate) 61.50 65.16

Less: Investment in Operating. Capital 30.20
Free Cash Flows – FCF = 34.96

  • b. What is the horizon value as of 12/31/2011?

Horizon Value HVt = [FCFt x (1+g)] / (WACC-g)
=[ 34.96 x (1+.06)] / (11-6)
Horizon Value 741.152

  • c. What is the value of operations as of 12/31/2010?

PV (HVt @WACC + NPVFCF@WACC)
PV HVt @WACC 667.70
+ NPV FCF@WACC 31.50
Value of Operations as on 12/31/11 = 699.20

  • d. What is the total value of the company as of 12/31/2010?

Vop t + V non operating Assets
=
Vop t + Mar. Securities
Total Company Value as on 12/31/11 7 = 49.10

  • e. What is the intrinsic price per share for 12/31/2010?

= V firm - V debt - V preference stock V. Debt = N/P + LT Bonds 210.70
V. Preference Stock = 35.00
V. Equity = V[firm-debt-ps] 503.40
PRICE PER SHARE = = V. Equity / Number of Shares Outstanding
=
50.34

Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3906
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Rakhi Vasavada and other Finance Specialists are ready to help you
Customer: replied 2 years ago.

Please, I need help with this final project, it is 3 hour timing, do you have time to help me now.. Thank you

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

Kindly send across and let me see if I can help.

Warm Regards,
Customer: replied 2 years ago.

http://www.mediafire.com/view/?v8bpsstz55b3w4h, Please I only have 3 hours to complete, could you explain the long questions of calculations, Thank you,


I am connected waiting for the final answer

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

Here you go. I have put calculations wherever possible.
Hope this helps...

Warm Regards,,
================================================================

1.Which of the following statements is NOT correct?

èThe corporate valuation model discounts free cash flows by the required return on equity.

2. Which of the following statements is correct?)

If a project with normal cash flows has an IRR greater than the WACC, the project must also have a positive NPV.


3. The Ackert Company's last dividend was $1.55. The dividend growth rate is expected to be constant at 1.5% for 2 years, after which dividends are expected to grow at a rate of 8.0% forever. The firm's required return (rs) is 12.0%. What is the best estimate of the current stock price?

a. $37.05
Calculations:

Year 1 dividend 1.55*1.015= 1.57325
Year 2 dvidend 1.57325 *1.015= 1.5968
Stock price after year 2 1.5968*1.08/(.12-.08)= 43.11.

So current stock price will be these amounts discounted back to the present at the 0.12 rate of return.

1.57325/1.12 +1.5968/1.12^2 +43.11/1.12^2= 37.05

4. (TCO G) The Chadmark Corporation's budgeted monthly sales are $3,000. In the first month, 40% of its customers pay and take the 2% discount.
The remaining 60% pay in the month following the sale and don't receive a discount.

Chadmark's bad debts are very small and are excluded from this analysis. Purchases for next month's sales are constant each month at $1,500.
Other payments for wages, rent, and taxes are constant at $700 per month. Construct a single month's cash budget with the information given.
What is the average cash gain or (loss) during a typical month for the Chadmark Corporation?

Current month sales collected: 3000 x 40% x (100%-2%) = $1176

ADD: Prior month sales collected: 3000 x 60% = $1800

LESS: purchases $1500

LESS: other expenses $700

= $776 average cash gain during a typical month.

5. (TCO G) Clayton Industries is planning its operations for next year, and Ronnie Clayton, the CEO, wants you to forecast the firm's additional funds needed (AFN). The firm is operating at full capacity. Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year? Dollars are in millions.

Last year's sales = S0

$350

Last year's accounts payable

$40

Sales growth rate = g

30%

Last year's notes payable

$50

Last year's total assets = A0*

$500

Last year's accruals

$30

Last year's profit margin = PM

5%

Target payout ratio

60%


Answer = d. $119.9
Calculations:

Last year's sales = S0$350

Sales growth rate = g30%

Forecasted sales = S0 (1 + g) = $455

S = change in sales = S1 – S0 = S0 g = $105

Last year's total assets = A0 = A* since full capacity = $500

Forecasted total assets = A1 = A0 (1 + g) = $650

Last year's accounts payable = $40

Last year's notes payable. Not spontaneous, so does not enter AFN calculation = $50

Last year's accruals = $30

L* = payables + accruals = $70

Profit margin = M = 5.0%

Target payout ratio = 60.0%

Retention ratio = (1 – Payout) =40.0%

AFN = (A*/S0) S – (L*/S0) S – Margin x S1 (1 – Payout)

= $150 – $21 – $9.1 = $119.9

6.The Dewey Corporation has the following data, in thousands. Assuming a 365-day year, what is the firm's cash conversion cycle?

Annual sales =
Annual cost of goods sold =
Inventory =
Accounts receivable =
Accounts payable =

$45,000
$31,500
$4,000
$2,000
$2,400



d. 35 days

Calculations:

Sales $45,000.00

COGS $31,500.00

Inventories $4,000.00

Receivables $2,000.00

Payables $2,400.00

Days/year 365

Actual CCC = (Inventory ÷ COGS/365) + (Receivables ÷ Sales/365) – (Payables ÷ COGS/365)

= $4000 ÷ ($31500/365) + $2000 ÷ ($45000/365) - $2400 ÷ ($31500/365)
= 46.34921 + 16.22222 - 27.80952

= 46.3 + 16.2 - 27.8

Actual CCC = 34.8

7.Bumpas Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 2/15, net 50. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its nonfree trade credit? (Assume a 365-day year.)

d. 23.45%

EAR = (1 + 2/98)365/35 - 1 = 1.2345 - 1 = 0.2345 = 23.45%.

8.Daves Inc. recently hired you as a consultant to estimate the company's WACC. You have obtained the following information. (1) The firm's noncallable bonds mature in 20 years, have an 8.00% annual coupon, a par value of $1,000, and a market price of $1,050.00. (2) The company's tax rate is 40%. (3) The risk-free rate is 4.50%, the market risk premium is 5.50%, and the stock's beta is 1.20. (4) The target capital structure consists of 35% debt and the balance is common equity. The firm uses the CAPM to estimate the cost of common stock, and it does not expect to issue any new shares. What is its WACC?

e. 8.79%
Calculations:

First step find the before-tax cost of debt:
N = 20, PMT = 80, FV = 1000, PV, 1050... I =7.51%
After tax cost = 7.51% * 60% = 4.51%
cost of equity = 4.5% + 1.2(5.5%) = 11.1%
WACC = 35% * 4.51% + 65%* 11.1% = 1.58% + 7.215% = 8.79%

9. Zhdanov Inc. forecasts that its free cash flow in the coming year, that is, at t = 1, will be -$10 million, but its FCF at t = 2 will be $20 million. After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of capital is 14%, what is the firm's value of operations, in millions?


b. $167
Calculations:

FCF1= -$10M, FCF2 = $20M
We also need to calculate the terminal value, sometimes called the horizon value (the value after which the cash flows are constant)

FCF3 for g=4% which we have FCF3 = FCF2*(1+g). ie FCF3= 20*(1+4%) = $20.8M

Therefore, Terminal Value TV would be : TV =20.8/(14%-4%) = $208M
NOW, discount each FCF by the WACC, sum up the results (add the TV to the last cash flow, so your last cash flow should be FCF2/(1+WACC)+TV/(1+WACC)^2), after summing up the results, to get to the firm's value.
= -10+20/(1+14%)^1 + 208/(1+14%)^2 = $ $167.59

10. Based on the corporate valuation model, the value of a company's operations is $900 million. Its balance sheet shows $70 million in accounts receivable, $50 million in inventory, $30 million in short-term investments that are unrelated to operations, $20 million in accounts payable, $110 million in notes payable, $90 million in long-term debt, $20 million in preferred stock, $140 million in retained earnings, and $280 million in total common equity. If the company has 25 million shares of stock outstanding, what is the best estimate of the stocks price per share?

c. $28.40
Calculations:

Total market value = Value of operations non - operating assets
= $900 + $30 = $930 million.
Market value of equity = Total market value – (Value of debt Value of Preferred stock)
= $930 – (Long-term debt Preferred stock)
= $320 – ($90 $20 $110)
= $710 million.
Price per share = Market value of equity / Number of shares

= $710 / 25 = $28.4.


Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3906
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Rakhi Vasavada and other Finance Specialists are ready to help you
Customer: replied 2 years ago.

http://www.mediafire.com/view/?xrdfpxllykm1hr4, Please Could you help me with this Project, Thank you

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

I am pasting the problem and the solutions below.
I am sure this would help...
Warm Regards,
------------------------------------------------------------------------------------

Middlesex Plastics Manufacturing had 2011 Net Income of $15.0 Million. Its 2012 Net Income is forecast to increase by 8%. The company’s capital structure has been 35% Debt and 65% Equity since 2010, and the company plans to maintain this capital structure in 2012. The company paid $3.0 Million cash dividends in 2011. The company is planning to invest in a major capital project in 2012. The capital budget for this project is $12.0 Million in 2012.

Let us first put in figures what is GIVEN and mentioned above:

2011 Net Income = $15,000,000

2012 Net Income = increased by 8% = ($15,000,000) + ($15,000,000 * 8%) = $16,200,000

2012 Target Equity Ratio = 65%

2011 Dividend Payout = $3,000,000

2012 Capital Budget = $12,000,000

1. If Middlesex increases its cash dividends in 2012 at the same rate of growth as its Net Income rate, what will be the total 2012 dividend payout in Dollars?

Net Income increased by 8 percent: $15,000,000 * 0.08= $16,200,000

Total dividends payout in Dollars: $3,000,000 * 0.08= $3,240,000

2. What is the 2012 dividend payout ratio if the company increases its dividends at 8%?

The 2012 payout ratio is $3,240,000/16,200,000= 0.20%

3. If the company follows a residual dividend policy, and maintains its 35% Debt level in its capital structure, and invests in the $12.0 Million capital budget in 2012, what would be the Residual Dividend level (in Dollars) in 2012? What would be this Residual Dividends payout ratio?

Residual Dividends Payout level in (Dollars) :

(0.65)($12,000,000)=$7,800,000

$16,200,000- $7,800,000= $8,400,000

The Residual Dividends payout ratio:

$8,400,000/$16,200,000= 0.52%

4. How much additional capital (Debt and/or Equity) will the company have to raise from outside sources in 2012 if it invests in this capital project, and follows a residual dividend policy?

(0.35)($12,000,000)= $4,200,000

OR

$12,000,000 -$7,800,000= $4,200,000

5. What would be the prudent dividend policy for 2012?: Pay dividends at the current dividend growth rate of 8%, or pay the residual dividend amount.

It would be proper to pay the dividend at current growth rate of 8%

----------------------------------

Warrants

Maese Industries Inc. has warrants outstanding that permit the holders to purchase 1 share of stock per warrant at a price of $25.

  • a. Calculate the exercise value of the firm’s warrants if the common sells at each of the following prices: (1) $20, (2) $25, (3) $30, (4) $100. (Hint: A warrant’s exercise value is the difference between the stock price and the purchase price specified by the warrant if the warrant were to be exercised.)

a. Expiration value = Current price - Striking price.

Current Striking Expiration

Price Price Value

$ 20 $25 -$5 or 0

25 25 0

30 25 5

100 25 75

  • b. Assume the firm’s stock now sells for $20 per share. The company wants to sell some 20-year, $1,000 par value bonds with interest paid annually. Each bond will have attached 50 warrants, each exercisable into 1 share of stock at an exercise price of $25. The firm’s straight bonds yield 12%. Assume that each warrant will have a market value of $3 when the stock sells at $20. What coupon interest rate, and dollar coupon, must the company set on the bonds with warrants if they are to clear the market? (Hint: The convertible bond should have an initial price of $1,000.)

b. V Package = $1,000 = = VB + 40($3)

VB = $1,000 - $150 = $850.

$850 = =

= I (7.4694) + $1,000(0.1037) = I(7.6494) + $103.70

$746.30 = I (7.4694)

I = = $99.91 $100.

Therefore, the company would set a coupon interest rate of 10 percent, producing an annual interest payment I = $100.

Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3906
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Rakhi Vasavada and other Finance Specialists are ready to help you
Customer: replied 2 years ago.

http://www.mediafire.com/view/?skzuz2mdjc0af6v, Good morning please could you help me with this assignment, it is due this comming Saturday, 09/15/2012

Customer: replied 2 years ago.

Please I need help with a homework, Once I open I cannot close until I finish is Two hour as a limited time, THank you

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

http://www.mediafire.com/view/?skzuz2mdjc0af6v

IS THIS the one you need help on. OR, Post your work and let me see.

Warm Regards
Customer: replied 2 years ago.

http://www.mediafire.com/view/?ob3clw5wndpfq5e, Please I need great help , could help me with the answer and the explanation of these 5 question, I have two hours at maximum, thank you

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

Sure.. let me see and I shall revert.

Regards
Customer: replied 2 years ago.


I only have left 43 minutes,

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

Thanks for SPECIFICALLY REQUESTING ME.

1 Which of the following statements concerning common stock and the investment banking process is NOT CORRECT?



(d) Stockholders have the right to elect the firm's directors, who in turn select the officers who manage the business. If stockholders are dissatisfied with management's performance, an outside group may ask the stockholders to vote for it in an effort to take control of the business. This action is called a tender offer.

Explanation – This cannot be called tender offer. Tender offer is generally is a takeover bid in the form of a public invitation to shareholders to sell their stock, generally at a price above the market price.

2 Europa Corporation is financing an ongoing construction project. The firm will need $5,000,000 of new capital during each of the next three years. The firm has a choice of issuing new debt or equity each year as the funds are needed, or issue only debt now and equity later. Its target capital structure is 40 percent debt and 60 percent equity, and it wants to be at that structure in three years, when the project has been completed. Debt flotation costs for a single debt issue would be 1.6 percent of the gross debt proceeds. Yearly flotation costs for three separate issues of debt would be 3.0 percent of the gross amount. Ignoring time value effects, how much would the firm save by raising all of the debt now, in a single issue, rather than in three separate issues?

(c) $88,006

Explanation : Single Debt Issue = $15Million x 40% Debt to Equity Ratio = $6Million

Total Debt costs needed would be $6Million / (1-Flotation costs)

=6,000,000/(1-0.016)= 6,000,000/0.984)= 6,097,561

Multiple Debt -- $6Million in total still needed for debt proceeds

Here, total debt proceeds needed would be $6Million / (1-Flotation costs)

=6,000,000/(1-0.03)= 6,000,000/0.97)= 6,185,567

Therefore, Net savings would be 6,185,567-6,097,561 = $88,006

3 New York Waste (NYW) is considering refunding a $50,000,000, annual payment, 14 percent coupon, 30-year bond issue that was issued five years ago. It has been amortizing $3 million of flotation costs on these bonds over their 30-year life. The company could sell a new issue of 25-year bonds at an annual interest rate of 11.67 percent in today's market. A call premium of 14 percent would be required to retire the old bonds, and flotation costs on the new issue would amount to $3 million. NYW's marginal tax rate is 40 percent. The new bonds would be issued when the old bonds are called.

What will the after-tax annual interest savings for NYW be if the refunding takes place?

(c) $768,900

4. (TCO E) Which of the following statements is most CORRECT?

(e) A key difference between a capital lease and an operating lease is that with a capital lease, the lease payments provide the lessor with a return of the funds invested in the asset plus a return on the invested funds, whereas with an operating lease the lessor depends on the residual value to realize a full return of and on the investment.
(Points : 20)

5 (TCO E) Sutton Corporation, which has a zero tax rate due to tax loss carry-forwards, is considering a 5-year, $6,000,000 bank loan to finance service equipment. The loan has an interest rate of 10 percent and would be amortized over five years, with five end-of-year payments. Sutton can also lease the equipment for 5 end-of-year payments of $1,790,000 each. How much larger or smaller is the bank loan payment than the lease payment? Note: Subtract the loan payment from the lease payment.

(c) $207,215

Using Excel use PMT(10%,5,6000,0), =(NNN) NNN-NNNN/span>

1790000 –(NNN) NNN-NNNN= $207,215

Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3906
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Rakhi Vasavada and other Finance Specialists are ready to help you
Customer: replied 2 years ago.

Please could you help me with this homework, http://www.mediafire.com/view/?pfdedfp6x2x3atp.. thank you

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

No. 1 - Exchange rates

If one U.S. dollar buys 1.64 Canadian dollars, how many U.S. dollars can you purchase for one Canadian dollar?

1/1.64 = 0.61

No. 2 - Currency Appreciation

Suppose 144 yen could be purchased in the foreign exchange market for one U.S. dollar today. If the yen depreciates by 8.0% tomorrow, how many yen could one U.S. dollar buy tomorrow?

144*1.08 = 155.52

No. 3 - Eurobonds versus domestic bonds

Suppose a foreign investor who holds tax-exempt Eurobonds paying 9% is considering investing in an equivalent-risk domestic bond in a country with a 28% withholding tax on interest paid to foreigners. If 9% after-tax is the investor's required return, what before-tax rate would the domestic bond need to pay to provide the required after-tax return?

9/1-0.28 = 12.5

No. 4 – Credit & Exchange Rate Risk

Suppose DeGraw Corporation, a U.S. exporter, sold a solar heating station to a Japanese customer at a price of 143.5 million yen, when the exchange rate was 140 yen per dollar. In order to close the sale, DeGraw agreed to make the bill payable in yen, thus agreeing to take some exchange rate risk for the transaction. The terms were net 6 months. If the yen fell against the dollar such that one dollar would buy 154.4 yen when the invoice was paid, what dollar amount would DeGraw actually receive after it exchanged yen for U.S. dollars?

143.5/154.4 =$0 .9294 Million

No. 5 – Forward Market Hedge

Suppose a U.S. firm buys $200,000 worth of television tubes from a Mexican manufacturer for delivery in 60 days with payment to be made in 90 days (30 days after the goods are received). The rising U.S. deficit has caused the dollar to depreciate against the peso recently. The current exchange rate is 5.50 pesos per U.S. dollar. The 90-day forward rate is 5.45 pesos/dollar. The firm goes into the forward market today and buys enough Mexican pesos at the 90-day forward rate to completely cover its trade obligation. Assume the spot rate in 90 days is 5.30 Mexican pesos per U.S. dollar. How much in U.S. dollars did the firm save by eliminating its foreign exchange currency risk with its forward market hedge?

Actual payment to be made = 200000*5.5 = 1.1 million peso to be made
Bought in forward = 1.1/5.45 = 201835
Rate after 90 days = 1.1/5.3 = 207547
Saving in $ = 207547-201835 = $5712

No. 6 :Relate Purchasing Power Parity issues to East Asian currencies vs. the U.S. Dollar.

Purchasing power parity can be defined as an economic theory that estimates the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to each currency's purchasing power.

Having said this, PPP issues of USD vis-à-vis the East Asian Currencies has increased negatively. This means the purchasing power of the east asian countries has decreased owing to the depreciation against US Dollar which is MORE as compared to depreciation of dollars against other currencies.

. No. 7: Relate Purchasing Power Parity issues to Central and South America currencies vs. the U.S. Dollar.

Purchasing power parity can be defined as an economic theory that estimates the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to each currency's purchasing power.

Having said this, PPP issues of USD vis-à-vis South American Currencies has been little different. The exchange rates have been somewhat constant or stagnant and in some cases, little stronger than the USD. So, the PPP in these areas has been more or less in line with the USD.


Hope this helps...
Warm Regards
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
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Customer: replied 2 years ago.

Please I need to do the last project, it is going to be 12 questions with their respectively explanations, it is going to be 3 hours, please could you help out with this project, once I open it I must finish it in 3 hours..Thank you. Could you help me out?

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

Kindly send it and let me see. I shall not take up most of your time...

Regards
Customer: replied 2 years ago.

http://www.mediafire.com/view/?zt6vn8d70lplbmv,


Please I need full explanation for every single question, I have left 2 hours and 50 minutes left,, Thank you I really appreciate your help..

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

1-)Which of the following statements concerning the MM extension with growth is NOT CORRECT?


(d) For a given D/S, the WACC is less than the WACC under MM's original (with tax) assumptions.

2. Which of the following is generally NOT true and an advantage of going public?

(e) Makes it easier for owner-managers to engage in profitable self-dealings.

3. Buster's Beverages is negotiating a lease on a new piece of equipment that would cost $100,000 if purchased. The equipment falls into the MACRS 3-year class, and it would be used for 3 years and then sold, because the firm plans to move to a new facility at that time. The estimated value of the equipment after 3 years is $30,000. If the borrow and Purchase Option is used, the cash flows would be the following: (Year 1) -2,400; (Year 2) -3,800; (Year 3) -1,400; (Year 4) -79,600; all of these cash outflows would be at the beginning of the respective years. Alternatively, the firm could lease the equipment for 3 years, with annual lease payments of $29,000 per year, payable at the beginning of each year. The firm is in the 20% tax bracket. If it borrows and purchases, it could obtain a 3-year simple interest loan, to purchase the equipment at a before-tax interest rate of 10%. If there is a positive Net Advantage to Leasing the firm will lease the equipment. Otherwise, it will buy it. What is the NAL?

(e) $6,972

4-). Suppose hockey skates sell in Canada for 105 Canadian dollars, and 1 Canadian dollar equals 0.71 U.S. dollars. If purchasing power parity (PPP) holds, what is the price of hockey skates in the United States?

(c) $74.55

5-) Banerjee Inc. wants to maintain a target capital structure with 30% debt and 70% equity. Its forecasted net income is $550,000, and its board of directors has decreed that no new stock can be issued during the coming year. If the firm follows the residual dividend policy, what is the maximum capital budget that is consistent with maintaining the target capital structure?

(d) $785,714

6-) Curry Corporation is setting the terms on a new issue of bonds with warrants. The bonds will have a 30-year maturity and annual interest payments. Each bond will come with 20 warrants that give the holder the right to purchase one share of stock per warrant. The investment bankers estimate that each warrant will have a value of $10.00. A similar straight-debt issue would require a 10% coupon. What coupon rate should be set on the bonds-with-warrants so that the package would sell for $1,000?

(d) 7.88%

7-) Which of the following statements is CORRECT, holding other things constant?

(e) An increase in the corporate tax rate is likely to encourage a company to use more debt in its capital structure.

8-)Which of the following statements is most CORRECT?
.
(e) To a large extent, the decision to dissolve a firm through liquidation versus keeping it alive through reorganization depends on a determination of the value of the firm if it is rehabilitated versus the value of its assets if they are sold off individually.

9-) In 1985, a given Japanese imported automobile sold for 1,476,000 yen, or $8,200. If the car still sold for the same amount of yen today but the current exchange rate is 144 yen per dollar, what would the car be selling for today in U.S. dollars?

(c) $10,250

10-) Which of the following statements about valuing a firm using the APV approach is most CORRECT?

(c) The value of operations is calculated by discounting the horizon value, the tax shields, and the free cash flows before the horizon date at the unlevered cost of equity.

11-) Call options on XYZ Corporation's common stock trade in the market. Which of the following statements is most correct, holding other things constant?

(a) The price of these call options is likely to rise if XYZ's stock price rises.

12-) A swap is a method used to reduce financial risk. Which of the following statements about swaps, if any, is NOT CORRECT?


(d) A problem with swaps is that no standardized contracts exist, which has prevented the development of a secondary market.

Hope this helps...

Warm Regards
Customer: replied 2 years ago.

Yes it helped, but I need the explanations or calculations how did you arrive to every single answer..Please I only have 1 hour 30 minutes left, I do not justify the answer the question is incomplete...

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

Just saw your reply. You did not mentioned in your original question reply and I saw the file, worked on temporary sheet and answered. Half of them are theoretical points. I am sorry, but I do not have those sheets anymore. Do you want to work out again ?

Regards
Customer: replied 2 years ago.
No because the project time just passed it, I expected at least on the problems with numerical value the explanation for the calculations
Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

I am sorry, but you did not mentioned this when you posted it originally. Anyways, its fine and you may not accept this.

Hope to assist you in a better way next time.

Warm Regards
Customer: replied 2 years ago.

Please could you help me with a homework that I have, I need to explain every single question..

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

Send across and let me see if I can help...

Warm Regards
Customer: replied 2 years ago.

http://www.mediafire.com/view/?y6vw4qaoritqrn1, Please only explain me base in scenario the last question, thank you

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

(TCO A) Which of the following is not considered a derivative type of security: (Points : 5)

Common stock


2. (TCO A) Of the following investments which is considered a cash equivalent? (Points : 5)

Money market funds

3. (TCO A) Of the following derivative securities which one provides the contract holder the right to sell a stock to the contract seller at a specific price? (Points : 5)


Put option

4. (TCO A) When a company directly issues short term debt the security is called: (Points : 5)


Commercial Paper

5. (TCO A) If you contribute $400 to your company’s 401K program and you are in the 25% tax bracket how much is your take home income reduced? (Points : 5)


$300

The basis of this calculation is since you are in 25% tax bracket, the take home pay would get reduced by 75% of contributed amount, i.e.$300



Hope this helps...

Warm Regards
Customer: replied 2 years ago.

The last question that I meant to explain is this situation not the last question of the multiple choice:


This the question: is not about length or any specific restriction



If you are a 65-year-old investor with the following demographics: retired but you do some part-time consulting, you own your home, kids are grown, you are married, you and your spouse are on medicare, you have $2,000 a month disposable income, and a portfolio of $250,000. What are your likely investment objectives and what constraints could there be that would keep you from accomplishing these objectives?

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

This was NOT there in the file you provided.

At this age and demographics, the prime objective of the investment should be capital protection. While this is done, the investments / portfolio should consist of more of debt than equity. While this is being done, again, the tragetted return on this should not be more than 5% after adjusting the inflation. Further, to this, it should be ensured that the portfolio has adequately liquid instruments so that the money is can be made available on demand.

While achieving this objective, the constraints that one can face would be from the balance of the portfolio. Adequate care needs to be taken to see that there is not more equity portion in the portfolio whould would then unevenly spread the risk. Further, rise in inflation on one hand and lesser return can negate the real returns on the portfolio.

Hope this helps...
Regards
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3906
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Rakhi Vasavada and other Finance Specialists are ready to help you
Customer: replied 2 years ago.

Please could you help me out with one activity, thank you

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

Certainly. Kindly tell me what can I help you with ?

Regards
Customer: replied 2 years ago.

http://www.mediafire.com/view/?m4c0c21qegtizuc, These are the question, the First two questions are short answer questions and the rest multiple choices.

Expert:  Rakhi Vasavada replied 2 years ago.

Dear Friend,

Here are your answers. Hope this would help.

1-) Which markets are showing the least correlation and could be good candidates for delivering international diversification to a US investor?

Presuming this pertains to the international financial and capital Markets, the Markets of hongkong and other Far East provide relatively low correlation to the US Markets. Although the stocks in these Markets (Far East in general and HK in particular) are more volatile as compared to the US, their systematic component of

risk is relatively low because of the low correlation with the U.S. market. The net result is that the systematic risk (beta) of the average Hong Kong and Far East Markets like Singapore stock from a U.S. perspective is only 0.85, compared with a beta of 1.0 for the average U.S. stock. In other words, diversifying into Hong Kong and Far East Markets stocks will reduce the riskiness of a portfolio currently concentrated in U.S. stocks.

2-) Which markets would you select to achieve the desired international diversification with the US?

We would choose financial Markets to effectively achieve desired levels of international diversification. This is because, the quantum of investments of money can easily be measured and the diversification can be measured and controlled using scientific tools like beta. All U.S. companies are more or less subject to the same cyclical economic fluctuations. Foreign securities by contrast involve claims on economies whose cycles are not perfectly in phase with the U.S. economic cycle. Thus, just as movements in different stocks partially offset one another in an all-U.S. portfolio, so also movements in U.S. and non-U.S. stocks cancel out each other somewhat.

3. (TCO D) If you purchase a three month $10,000 T-Bill for $9,800, what is the actual return for the three months? (Points : 5)

8%

4. (TCO D) The price of a stock at the beginning is $40.00 and ends at $45.00. If the stock paid a dividend of $3.00, what is the holding period return for a year? (Points : 5)

20%

5. (TCO I) An investment has an expected return of 15 percent, a standard deviation of 30 percent, and the risk free rate is five percent. What is the reward-to-variability ratio? (Points : 5)

33%

6. (TCO I) Calculate the risk free rate in the CAPM model for the following data: expected return on the market 20 percent, expected return on a stock 25 percent, and the stock beta is 1.5. (Points : 5)

10%


7. (TCO I) The holding period return on a stock is equal to _________. (Points : 5)


the capital gain yield over the period plus the dividend yield



Warm Regards,

Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3906
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Rakhi Vasavada and other Finance Specialists are ready to help you
Customer: replied 2 years ago.

Please I need help with Homework, the first 2 questions are short analysis questions and the rest of the question are multiple choice question.

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

Kindly post it so that I can have a look.

Warm Regards
Customer: replied 2 years ago.

http://www.mediafire.com/view/?o5nix5clgu0lv50, Thank you

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

1-) Are the markets efficient? If the markets were completely efficient, how would you explain the dot-com bubble of the late 1990s and the subsequent bear market? Compare and contrast this episode with the current housing market.

Efficient Market Hypothesis, popularly known as EMH, maintains that all stocks are equally priced according to their inherent investment properties, the knowledge of which all participants possess equally. The rationale is When an unexploited profit opportunity arises on a security (so-called because, on average, people would be earning more than they should, given the characteristics of that security), investors will rush to buy until the price rises to the point that the returns are normal again.

However, many evidences are found against the Markets being efficient and some explain the dot com bubble and also the subsequent bear Markets. One such factor is Market Overreaction. recent research suggests that stock prices may overreact to news announcements and that the pricing errors are corrected only slowly. When corporations announce a major change in earnings, say, a large decline, the stock price may overshoot, and after an initial large decline, it may rise back to more normal levels over a period of several weeks. If we try and CONTRAST this against current housing Market, the fall in the prices after the lehman crisis has been sudden, but the recovery is very slow and gradual.

Second such evidence that explains this is Excessive Volatility. The stock market appears to display excessive volatility; that is, fluctuations in stock prices may be much greater than is warranted by fluctuations in their fundamental value. This exactly happened with dot com stocks. The extremely volatility lead it to exorbitant pricing but this were much greater than what was supported by its fundamental valuations. This lead to sudden crash in the prices. If we contrast this with current Housing Markets, the housing Markets and its lenders were excessively valued, leading to overvaluation. This lead to sudden decline of the stock prices.

2-) As an investment advisor, you have done your due diligence and determined that a stock is undervalued and you want to buy it. Now you can analyze the stock price using technical analysis. Technical analysis is based on the assumption that markets are driven more by psychological factors than by fundamental values. Behavior finance, or market psychology, asserts that history and patterns tend to repeat. Numerous indicators are used in technical analysis. Go to a technical analysis website such as www.stockcharts.com and access the descriptions for "MACD," "Call/Put Ratio," "TRIN," and "Support/Resistance." Are these valuable tools?

Look at the company's charts that you are tracking for this course. Are there patterns that are predictive?

YES… All these are very valuable tools. MACD – i.e. Moving Average Convergence Divergence, is one of the most useful Momentum Indicators. The MACD turns two trend-following indicators, moving averages, into a momentum oscillator by subtracting the longer moving average from the shorter moving average. As a result, the MACD offers the best of both worlds: trend following and momentum. The interpretation is that if the MACD trades above the signal line, it is a bullish sign and the stock is expected to show momentum on the upside.

Call Put Ratio – Often known as PCR is a total number of Puts traded as against Calls. The Put/Call Ratio is an indicator that shows put volume relative to call volume. Put options are used to hedge against market weakness or bet on a decline. Call options are used to hedge against market strength or bet on advance Higher to put trades to calls, more a resistance would be seen at a given strike price. This determines the potential topping or bottoming out of the Markets.

TRIN – This is a Breadth Indicator. This is basically a Oscillator, and determines oversold or overbought positions / conditions in the Markets, greatly helping to determine exit or entry points.

Support and Resistance – These are the points where supply and demand meet. Supply is synonymous with bearish, bears and selling. Demand is synonymous with bullish, bulls and buying. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control. Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. Similarly, Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further. Support and resistance are like mirror images and have many common characteristics.

3-) The weak form of the EMH states that ________ must be reflected in the current stock price.


all publicly available information


4-) The tendency when the ______ performing stocks in one period are the best performers in the next, and the current ________ performers are lagging the market later is called the reversal effect.

worst, best

5-) If you believe in the __________ form of the EMH, you believe that stock prices reflect all publicly available information but not information that is available only to insiders.

semi-strong

6-) Choosing stocks by searching for predictable patterns in stock prices is called ________.


technical analysis

7-) Behavioralists point out that even if market prices are ____________ there may be _______________.


distorted; fundamental efficiency

Warm Regards,
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3906
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Rakhi Vasavada and other Finance Specialists are ready to help you
Customer: replied 2 years ago.

Please the homework that you helped me yesterday two of the questions the answer was wrong: Question 1 and question 5.


 
















1-) The weak form of the EMH states that ________ must be reflected in the current stock price.



all past information including security price and volume data
all publicly available information
all information including inside information
all costless information



 
















2-) The tendency when the ______ performing stocks in one period are the best performers in the next, and the current ________ performers are lagging the market later is called the reversal effect.



worst, best
worst, worst
best, worst
best, best



 
















3-) If you believe in the __________ form of the EMH, you believe that stock prices reflect all publicly available information but not information that is available only to insiders.



semi-strong
strong
weak
perfect



 
















4-) Choosing stocks by searching for predictable patterns in stock prices is called ________.



fundamental analysis
technical analysis
index management
random walk investing



 
















5-) Behavioralists point out that even if market prices are ____________ there may be _______________.



distorted; limited arbitrage opportunities
distorted; fundamental efficiency
allocationally efficient; limitless arbitrage opportunities
distorted; allocational efficiency



 

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

I had double checked it. Would you like further help in this regard. Kindly feel free to let me know ?

Warm Regards
Customer: replied 2 years ago.

The professor gave a second chance with other homework, could you help me out with this new assignment?

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

Sure, my accuracy so far has remained 95% error free. I shall try my level best. Post it and let me see.

Warm Regards
Customer: replied 2 years ago.

I could not have access to the new question, please I will post it later.. kindly thank you

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

Do not worry. Get back to my anytime. I am always at your disposal.

Warm Regards
Customer: replied 2 years ago.

Please could you help me out with 3 question HW, it is just you own well opinion ,,


 


1-) If we begin with the notion that investors do not process information correctly. And what information is represented by the market prices? As we know, this price information represents current level of of market participants expectations regarding future prices. Great. If this current level of expectations is flawed, it will still be reflected in market prices of the equities, irrespective of how poorly investors processed the information.
Meaning that it will still be reflecting those expectations, whether they are flawed or not. And the markets will be changing to reflect changes in these expectations, wouldn't they?


2-) How sensitive is this industry to changes in the aggregate demand of the consumers and the conditions of the economy?


3-) The fact that a stock is not demonstrating a clear pattern maybe suggesting that now is not the right time to take a position in this stock?
After all, the whole point of the exercise is to determine when to take a position and when to exit a position,


 

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

I shall revert about this in an hours and half time.

Warm Regards
Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

1-) If we begin with the notion that investors do not process information correctly. And what information is represented by the market prices? As we know, this price information represents current level of of market participants expectations regarding future prices. Great. If this current level of expectations is flawed, it will still be reflected in market prices of the equities, irrespective of how poorly investors processed the information. Meaning that it will still be reflecting those expectations, whether they are flawed or not. And the markets will be changing to reflect changes in these expectations, wouldn't they?

Yes, we can fairly begin with an notion or assumption that the investor do not possess all information correctly. Market prices of a security represent all such information that is available publicly, It usually discounts its past operating history, and future expectations of its profits in the current market price. Now, if this current levels of expectations are flawed, it may result into knee jerk reaction by the market participants. This would be irrespective of how poorly they possessed information. To explain this, if a sudden bad news comes out which is NOT known by the participants and NOT discounted in the current market price, the participants would give a sharp reaction to this and this may result in sharp decline in the prices in an attempt to discount this bad news, and vice versa. Yes, the Markets would certainly react and reflect such flawed expectations in due process.


2-) How sensitive is this industry to changes in the aggregate demand of the consumers and the conditions of the economy?

 

Aggregate demand (AD) is the total demand by domestic and foreign participants for an economy's scarce resources, less the demand by domestic participants for resources from abroad. This industry is extremely sensitive to the changes in the aggregate demand of the consumers and the conditions of the economy.

 

3-) The fact that a stock is not demonstrating a clear pattern maybe suggesting that now is not the right time to take a position in this stock? After all, the whole point of the exercise is to determine when to take a position and when to exit a position,


YES.. when a stock is not demonstrating a clear pattern on the Charts, it is certainly NOT the right time to make entry or exit. A pattern of a stock reflects picture of its demand and supply and reflects the mind set of the participants. When it does not demonstrate a clear pattern, it shows that neither the buyer of the stock is fully convinced nor the seller has full conviction. This results into lack of conviction to buy or sell on either side and results into sideways movement of the stock. So, until a directional trigger is there, no stock should be exited or entered.

I hope this helps...

Warm Regards
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3906
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Rakhi Vasavada and other Finance Specialists are ready to help you
Customer: replied 2 years ago.

Please could you help me out with a project???

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

Sure, Kindly post it and let me see if I can help..

Warm Regards
Customer: replied 2 years ago.

Please I only have two hour..http://www.mediafire.com/view/?us11b1d8f8f9fwy, please could you explain the question,, thank you ... I only have two hour left

Customer: replied 2 years ago.

http://www.mediafire.com/view/?us11b1d8f8f9fwy,, This is the project, i Have only 1 hour left,, please could you explain the question??

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

I am almost done... I will meet your deadline..

Regards
Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

I am not able to solve No. 11.

1. (TCO D) Find the required return for a stock, given that the current dividend is $4.45 per share, the dividend growth rate is 6.5 percent, and the stock price is $101.00 per share. (Points : 5)


10.91%

2. (TCO D) Find the next dividend on a stock given that the required return is 9.78 percent, the dividend growth rate is 7.77 percent, and the stock price is $94.89 per share. (Points : 5)


$1.91

3. (TCO D) A company has cash of $500, accounts receivable of $200, and inventory of $400. The company also has current liabilities of: accounts payable $300 and notes payable $600. What is the company's current ratio? (Points : 5)

1.22


4. (TCO B) Behavioralists point out that even if market prices are ____________ there may be _______________. (Points : 5)

distorted; limited arbitrage opportunities

5. (TCO B) You can earn abnormal returns on your investments via macro forecasting ______. (Points : 5)

if you can forecast the economy better than the average forecaster

6. (TCO A) _____ is considered to be an emerging market country. (Points : 5)

Brazil

7. (TCO A) Barnegat Light sold 200,000 shares in an initial public offering. The underwriter's explicit fees were $90,000. The offering price for the shares was $35, but immediately upon issue, the share price jumped to $43. What is the best estimate of the total cost to Barnegat Light concerning the equity issue? (Points : 5)


$1,690,000

8. (TCO A) You earn six percent on your corporate bond portfolio this year, and you are in a 25 percent federal tax bracket and an eight percent state tax bracket. Your after tax return is _____. (Assume that federal taxes are not deductible against state taxes and vice versa). (Points : 5)


4.14%

9. (TCO I) CAPM is one of the more popular models for determining the risk premium on a stock. If the Expected Return on the Market Portfolio is 9.10%, the Risk-Free Rate is 2.0%, and the Beta for Stock i is 0.9. Find the Expected Return on the Stock using the CAPM model. Show your work. (Points : 34)


= 2 + 0.90 (9.1-2)

= 2 +6.89

= 9.89%

10. (TCO D) XYZ company paid a dividend of $4.66 in the past 12 months. The annual dividend growth rate is 6.93 percent, and the required rate of return on the stock is 10.25 percent. Calculate the current price of the stock. Do not use a financial calculator or an online calculator. You must show your work. (Points : 34)


Stock Price = Dividends (Div) / (Expected Return (R) - Dividend Growth Rate (G))

Stock Price = Div / (R - G)

= 4.46 / (10.25-6.93)

= 4.46 / 3.32

= 1.34337

=134.34


12. (TCO E) In the past 10 years, Behavioral Finance has begun to explain the qualitative side of market movements and investor decisions. Explain the concept and the value it can provide to the investment markets. (Points : 34)


It is fairly correct to say that Behavirol finance has begun to explain the qualitative side of the Market movements and investor decisions. Behavioural Finance is the study of the inuence of psychology on the behaviour of financial practitioners and the subsequent effect on markets. Behavioural

finance is of interest because it helps explain why and how markets might be

inefficient. Behavioral finance is a relatively new field that seeks to combine behavioral and cognitive psychological theory with conventional economics and finance to provide explanations for why people make irrational financial decisions.

The Key concepts covers Anchoring, Mental Accounting, Confirmation and Hindsight Bias, herd behavior, Overconfidence, Overreaction and Availability Bias, Prospect Theory, etc.

It also offers tremendous value to the investment markets. Behavioural finance is an approach that is becoming increasingly popular as an approach to capital investments. But what lies behind it and how can it be used by advisers to benefit clients

The basic premise of behavioural finance is that investor behaviour often exhibits “anomalies”, that is, they have behavioural patterns or tendencies that have no rational explanation. This is reflected in their investment decisions and in the prices of securities and on the stock exchanges. There are no purely rational investment decisions that, as the rational markets theory would have it, lead to efficient markets. On the contrary, there are always inefficiencies.

It adds value to the investment markets as it teaches investors to avoid leverage and diversify the trading. Following behavioral finance, investor presses for more management study and study of fundamentals, and would make him seek contrary opinions. He would not be guided solely by the historical prices

13. (TCO B) Although the Efficient Markets Hypothesis is a popular theory, there are several limitations. Identify and explain two of those limitations. (Points : 34)


Efficient Market Hypothesis also popularly known as EMH, investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices.

Having said this, there are several limitation also. The basic limitation is that it is very weak foundations. . The effectiveness of these hypothesis depends upon validity of one of the three conditions viz. rational investment decisions, independent irrational investment decisions, and arbitrage. In practice, none of these three conditions are valid.

For example, let us take two points, i.e.e Rational Investment Decisions and Independent Deviations from rationality..

Rationality: All investors in the market should be rational. When relevant information is released in the market by a firm, all investors will adjust their estimates of stock prices of the firm in a rational way. E.g., the relevant information could be the announcement of new product development by a firm.

Independent deviations from rationality: Deviations from rationality are not random, thus they are not likely to cancel out in a whole population of investors. It is not uncommon in the market place that investors over value an upcoming new sector like internet, information technology or biotechnology. In these cases, investors believe that current performance of these sectors is representative of the future performance. This behavior of representativeness leads to bubbles in the markets, which is not explained by efficient market hypothesis. On the other hand, there are some conservative investors who are too sluggish to adjust to new information. This results in a slow process of price adjustment to new relevant information. This is against the concept of efficient market hypothesis.


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Customer: replied 1 year ago.

Please could you help me with a project.. Thank you

Expert:  Rakhi Vasavada replied 1 year ago.
Dear Friend,

yes.. kindly post it so that I can see .

Warm Regards
Customer: replied 1 year ago.

http://www.mediafire.com/view/?jwhbc2mgqfu1d8n,, Please in the last 5 question I need your own opinion well explained.. Thank you

Expert:  Rakhi Vasavada replied 1 year ago.
Dear Friend,

Top of Form

1. When discussing bonds, convexity relates to the _______. (Points : 5)

shape of the bond price curve with respect to interest rates

2. A __________ bond is a bond where the bondholder has the right to cash in the bond before maturity at a specific price after a specific date. (Points : 5)


puttable


3. A pension fund has an average duration of its liabilities equal to 15 years. The fund is looking at 5-year maturity zero coupon bonds and four percent yield perpetuities to immunize its interest rate risk. How much of its portfolio should it allocate to the zero coupon bonds to immunize, if there are no other assets funding the plan? (Points : 5)

33%

4. The duration of a portfolio of bonds can be calculated as _______________. (Points : 5)

the value weighed average of the durations of the individual bonds in the portfolio

5. Find the Yield-to-Maturity on a Semiannual Coupon Bond with a Price of $974, a Face Value of $1000, an Annualized Coupon Rate of 8.7 percent, and four years remaining until Maturity. (Points : 5)

9.5%

6. Did anybody see indications as to what is the lag between major trends in PPI and CPI?

PPI - It is often assumed that the direction and magnitude of price change in the Producer Price Index (PPI) for finished goods anticipates a similar change in the Consumer Price Index (CPI) for all items. When this assumed relationship is contradicted by the actual movements of the two series, as it often is, many data users ask why the PPI and CPI show different price movements.

Yes, it can be rightly said that there is a lag between major trends in PPI and CPI. There are reasons that can be attributed to it. While both the PPI and CPI measure price change over time for a fixed set of goods and services, they differ in two critical areas: (1) the composition of the set of goods and services, and (2) the types of prices collected for the included goods and services.

The differences between the PPI and CPI are consistent with the different uses of the two measures. A primary use of the PPI is to deflate revenue streams in order to measure real growth in output. A primary use of the CPI is to adjust income and expenditure streams for changes in the cost of living.

The composition of items in the Finished Goods Price Index differs from that of the All Items Consumer Price Index in two major respects. First, the Finished Goods Price Index includes price changes for producers' durable equipment, which are not purchased by typical consumers and, therefore, are not included in the CPI. Second, the All Items CPI includes services which are not reflected in the Finished Goods Price Index. An additional difference is that the Finished Goods Price Index is only available at the U.S. level, while the All Items CPI is available at the regional, metropolitan area, and U.S. levels.

7. Consumer credit has started growing again. Do you think we may return to reckless days of the pre-crisis debt to equity ratios of the households?

Yes, again, it can definitely be said that consumer credit has started growing again. However, in the same breadth, it just cannot be said that we may return to reckless days of the pre-crisis debt to equity ratios of the households. There are solid logic and reasoning behind it.

In fact, growing consumer credit is a good sign of a expanding and improving economy. Post the crises, the lenders have come up with better and stricter credit appraisals, better eligibilities, and far elaborate screening processes. This is resulted into better asset qualities with the lenders. So, consumer credit growth is not alone, but is accompanied with better asset qualities which is certainly a good sign and a positive factor. It just cannot be said that mere growth in consumer credit will take us back to the credit crisis period.

8. Would you be using the principle of portfolio immunization and adjusting the portfolio duration to match your target period?

The principle of portfolio immunization is an investment strategy used to minimize the interest rate risk of investments by adjusting the portfolio duration to match the investor's investment time horizon. It does this by locking in a fixed rate of return during the amount of time an investor plans to keep the investment without cashing it in.

Yes, one would certainly use this method / strategy. This is because it would help create a portfolio that is duration matched with the added constraint that it be cash matched in the first few years.

9. Say, if you were to invest into bonds, what kind of indexes would you be looking at?

If one is to invest in bonds, it would look at US Corporate bond index, Dow Jones Corporate bond index, etc. The Dow Jones Corporate Bond Index is an equally weighted basket of 96 recently issued investment-grade corporate bonds with laddered maturities. The index intends to measure the return of readily tradable, high-grade U.S. corporate bonds. It is priced daily.

10. If you were planning investing into bonds, what maturities or what average duration would you be focusing on?

Average Maturity period would depend the investment horizon. The duration is normally decided by adding together the total amount of time until maturity and dividing by the number of debt securities in the mutual fund. The shorter the average maturity is, the less the fund's share price will fluctuate with changes in interest rates. The average maturity that one would look for would be 20 years.

Bottom of Form

Hope this helps...

Warm Regards,
Customer: replied 1 year ago.

Question number 3 was marked wrong. Could you fix that issue?

Expert:  Rakhi Vasavada replied 1 year ago.
Dear Friend,

I am getting it as 25%. I wrongly deleted the right answer.

Warm Regards
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3906
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Rakhi Vasavada and other Finance Specialists are ready to help you
Customer: replied 1 year ago.

Please could you help me out with this project? the two open question must be your opinion...http://www.mediafire.com/view/?8u22d53en1v42xk,,


Thank you

Expert:  Rakhi Vasavada replied 1 year ago.
Dear Friend,

1. You write one IBM July 120 call contract for a premium of $4. You hold the option until the expiration date when IBM stock sells for $121 per share. You will realize a ______ on the investment.

$300 profit


2. At contract maturity the value of a put option is ___________, where X equals the option's strike price and ST is the stock price at contract expiration.

Max(0, X - ST)


3. Longer term American style options with maturities of up to three years are called __________.

LEAPS

4. You buy a call option and a put option on General Electric. Both the call option and the put option have the same exercise price and expiration date. This strategy is called a _________.

long straddle

5. The S&P500 index futures contract is an example of a(n) ______ delivery contract. The pork bellies contract is an example of a(n) ______ delivery contract.

cash; actual

6. Either hedging a portfolio or increasing the returns, managers use one or a combination of five option strategies: spreads, straddles, strangles, covered calls, and condors. Select one of these strategies, explain how it works, and provide a specific example. In some of these strategies, there are several combinations, i.e bull spreads and bear spreads,

You may select a specific strategy for your example.

Options offer trading flexibility, increased leverage, and limited and measured risk going into a trade. In addition to trading options for profits, many traders use options to increase returns and generate income from stock positions and as a safety hedge for their stocks and portfolios.

SPREADS - The bull call spread option trading strategy is employed when the options trader thinks that the price of the underlying asset will go up moderately in the near term. Bull call spreads can be implemented by buying an at-the-money call option while simultaneously writing a higher striking out-of-the-money call option of the same underlying security and the same expiration month.

STRADDLES – The long straddle, also known as buy straddle or simply "straddle", is a neutral strategy in options trading that involve the simultaneously buying of a put and a call of the same underlying stock, striking price and expiration date. Long straddle options are unlimited profit, limited risk options trading strategies that are used when the options trader thinks that the underlying securities will experience significant volatility in the near term.

STRANGLES -- The long strangle, also known as buy strangle or simply "strangle", is a neutral strategy in options trading that involve the simultaneous buying of a slightly out-of-the-money put and a slightly out-of-the-money call of the same underlying stock and expiration date. The long options strangle is an unlimited profit, limited risk strategy that is taken when the options trader thinks that the underlying stock will experience significant volatility in the near term. Long strangles are debit spreads as a net debit is taken to enter the trade.

COVERED CALLS -- Covered Call writing is considered to be a very conservative investment strategy. You buy stock and sell someone the right to buy it from you some days in the future (at expiration day). For example, XYZ is trading at 17$. You sell someone the right to purchase your XYZ stock for 17.50$ for the next few days (until expiration day) for a premium of 2$. Technically this means, that you're selling a call ( a purchase option for usually 100 shares) with a strike of 17.50 and a premium of 2$.

CONDORS -- The condor option strategy is a limited risk, non-directional option trading strategy that is structured to earn a limited profit when the underlying security is perceived to have little volatility. For example, Using call options expiring on the same month, the trader can implement a long condor option spread by writing a lower strike in-the-money call, buying an even lower striking in-the-money call, writing a higher strike out-of-the-money call and buying another even higher striking out-of-the-money call. A total of 4 legs are involved in the condor options strategy and a net debit is required to establish the position.

Out of the five explained above, which one to use depends upon the market conditions and the mentality of a trader and the risk appetite of the fund manager and its objectives. Normally SPREADS are used by most of the long only funds. Let us see the example.

Maximum gain is reached for the bull call spread options strategy when the stock price move above the higher strike price of the two calls and it is equal to the difference between the strike price of the two call options minus the initial debit taken to enter the position.

The formula for calculating maximum profit is given below:

Max Profit = Strike Price of Short Call - Strike Price of Long Call - Net Premium Paid - Commissions Paid

Max Profit Achieved When Price of Underlying >= Strike Price of Short Call



7. We know that futures contracts relate to predicting the future value of an index or commodity. There are three primary strategies focused on these prediction contracts: Long; Short; and , Spreads. Select one of these strategies and explain how it works and the potential value to a portfolio.

Stock Futures Contract -- A single-stock future is a type of contract between two parties to exchange a specified number of stocks in a company for a price agreed today (the futures price or the strike price) with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange. The party agreeing to take delivery of the underlying stock in the future, the "buyer" of the contract, is said to be "long", and the party agreeing to deliver the stock in the future, the "seller" of the contract, is said to be "short". The terminology reflects the expectations of the parties - the buyer hopes or expects that the stock price is going to increase, while the seller hopes or expects that it will decrease.

Out of the three given, let us discuss the LONG Strategy, which is most widely used by the long only funds and majority of the funds. This involves buying of a stock future at a price and selling it at a higher price, thus booking profits on the long positions. For example, A month after you purchase your March XYZ contract the price of XYZ stock has increased, and you sell your long futures contract for $130.00. Your profit* would be $18 per share ($130 sale price - $102 purchase price), or $1,800 net ($18 x 100 underlying shares) for the contract. Loss occurs if sold at a lower price.



Hope this helps...

Warm Regards,
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3906
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Rakhi Vasavada and other Finance Specialists are ready to help you
Customer: replied 1 year ago.

could you help me out with a homework?

Expert:  Rakhi Vasavada replied 1 year ago.
Dear Friend,

Send across your questions and let me see if I can help. I will take little longer, approx 2 hrs if it is fine. If you want to make it faster, let me know.

Warm Regards
Customer: replied 1 year ago.

Thank you, XXXXX XXXXX it is due tomorrow, the homework is 4 open question not length requirement but quality it is a must, it is based in your opinion ,, This is the link: http://www.mediafire.com/view/?8u22d53en1v42xk


 


Thank you..

Expert:  Rakhi Vasavada replied 1 year ago.
Dear Friend,

Okay, I shall revert to you in some time.. No need to reply to this post.

Warm Regards
Expert:  Rakhi Vasavada replied 1 year ago.

Dear Friend,

 

Here you go..

1. You write one IBM July 120 call contract for a premium of $4. You hold the option until the expiration date when IBM stock sells for $121 per share. You will realize a ______ on the investment.

$300 profit


2. At contract maturity the value of a put option is ___________, where X equals the option's strike price and ST is the stock price at contract expiration.

Max(0, X - ST)


3. Longer term American style options with maturities of up to three years are called __________.

LEAPS

4. You buy a call option and a put option on General Electric. Both the call option and the put option have the same exercise price and expiration date. This strategy is called a _________.

long straddle

5. The S&P500 index futures contract is an example of a(n) ______ delivery contract. The pork bellies contract is an example of a(n) ______ delivery contract.

cash; actual

6. Either hedging a portfolio or increasing the returns, managers use one or a combination of five option strategies: spreads, straddles, strangles, covered calls, and condors. Select one of these strategies, explain how it works, and provide a specific example. In some of these strategies, there are several combinations, i.e bull spreads and bear spreads,

You may select a specific strategy for your example.

Options offer trading flexibility, increased leverage, and limited and measured risk going into a trade. In addition to trading options for profits, many traders use options to increase returns and generate income from stock positions and as a safety hedge for their stocks and portfolios.

SPREADS - The bull call spread option trading strategy is employed when the options trader thinks that the price of the underlying asset will go up moderately in the near term. Bull call spreads can be implemented by buying an at-the-money call option while simultaneously writing a higher striking out-of-the-money call option of the same underlying security and the same expiration month.

STRADDLES – The long straddle, also known as buy straddle or simply "straddle", is a neutral strategy in options trading that involve the simultaneously buying of a put and a call of the same underlying stock,striking price and expiration date. Long straddle options are unlimited profit, limited risk options trading strategies that are used when the options trader thinks that the underlying securities will experience significant volatility in the near term.

STRANGLES -- The long strangle, also known as buy strangle or simply "strangle", is a neutral strategy in options trading that involve the simultaneous buying of a slightly out-of-the-money put and a slightly out-of-the-money call of the same underlying stock and expiration date. The long options strangle is an unlimited profit, limited risk strategy that is taken when the options trader thinks that the underlying stock will experience significant volatility in the near term. Long strangles are debit spreads as a net debit is taken to enter the trade.

COVERED CALLS -- Covered Call writing is considered to be a very conservative investment strategy. You buy stock and sell someone the right to buy it from you some days in the future (at expiration day). For example, XYZ is trading at 17$. You sell someone the right to purchase your XYZ stock for 17.50$ for the next few days (until expiration day) for a premium of 2$. Technically this means, that you're selling a call ( a purchase option for usually 100 shares) with a strike of 17.50 and a premium of 2$.

CONDORS -- The condor option strategy is a limited risk, non-directional option trading strategy that is structured to earn a limited profit when theunderlying security is perceived to have little volatility. For example, Using call options expiring on the same month, the trader can implement a long condor option spread by writing a lower strike in-the-money call, buying an even lower striking in-the-money call, writing a higher strike out-of-the-money call and buying another even higher striking out-of-the-money call. A total of 4 legs are involved in the condor options strategy and a net debit is required to establish the position.

Out of the five explained above, which one to use depends upon the market conditions and the mentality of a trader and the risk appetite of the fund manager and its objectives. Normally SPREADS are used by most of the long only funds. Let us see the example.

Maximum gain is reached for the bull call spread options strategy when the stock price move above the higher strike price of the two calls and it is equal to the difference between the strike price of the two call options minus the initial debit taken to enter the position.

The formula for calculating maximum profit is given below:

Max Profit = Strike Price of Short Call - Strike Price of Long Call - Net Premium Paid - Commissions Paid

Max Profit Achieved When Price of Underlying >= Strike Price of Short Call



7. We know that futures contracts relate to predicting the future value of an index or commodity. There are three primary strategies focused on these prediction contracts: Long; Short; and , Spreads. Select one of these strategies and explain how it works and the potential value to a portfolio.

Stock Futures Contract -- A single-stock future is a type of contract between two parties to exchange a specified number of stocks in a company for a price agreed today (the futures price or the strike price) with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange. The party agreeing to take delivery of the underlying stock in the future, the "buyer" of the contract, is said to be "long", and the party agreeing to deliver the stock in the future, the "seller" of the contract, is said to be "short". The terminology reflects the expectations of the parties - the buyer hopes or expects that the stock price is going to increase, while the seller hopes or expects that it will decrease.

Out of the three given, let us discuss the LONG Strategy, which is most widely used by the long only funds and majority of the funds. This involves buying of astock future at a price and selling it at a higher price, thus booking profits on the long positions. For example, A month after you purchase your March XYZ contract the price of XYZ stock has increased, and you sell your long futures contract for $130.00. Your profit* would be $18 per share ($130 sale price - $102 purchase price), or $1,800 net ($18 x 100 underlying shares) for the contract. Loss occurs if sold at a lower price.



Hope this helps...

Warm Regards,

Customer: replied 1 year ago.

This is not the question that I asked, the link is : http://www.mediafire.com/view/?lvspff6gm6n2mmr,, thank you

Expert:  Rakhi Vasavada replied 1 year ago.

Dear Friend,

1-)I would suggest applying the Sharpe ratio and the Alpha coefficient in a specific setting of a fund, not as a general definition?

Sharpe Ratio, derived by William Sharpe in 1966, measures how much excess return you are receiving for the extra volatility that you endure for holding a riskier asset. It is worked out as :

S(x)=(Rx-Rf) / StdDev(x)

Where:

X is the Investment,
Rx is the average rate of return
Rf is the beta available

StdDev is the Standard Deviation

Let us try and put this is a specific set of example and see how it works.

Assume portfolio A had or is expected to have a 10% rate of return with a standard deviation of 0.10. In the United States, US treasury bills are often used as the benchmark for risk free interest rates. During the 20th century, the treasury bills averaged a return of about 0.9%. In that case, R would 0.10, Rf would be 0.009, and s would be 0.10. The equation would be set up to read (0.10 – 0.009)/0.10, which calculates to 0.91. In other words, the Sharpe ratio for portfolio A would be 0.91.

If portfolio B shows more variability than portfolio A, but has the same return of return, it will have a greater standard deviation, but the same R. Assuming the standard deviation for portfolio B is 0.15, the equation would read (0.10 – 0.009) / 0.15. The Sharpe ratio for portfolio would be 0.61, so portfolio B would have a lower Sharpe ratio relative to portfolio A. This is not a surprising result, considering the fact that both investments offered the same return, but B had a greater risk. Obviously, the one which has less risk but offers the same return would be the preferred option.

Let us now discuss Alpha Coefficient – This is a measure of the difference between an investment’s actual returns and its expected return, given its level of risk as measured by beta.Beta is a measure of the volatility, or systematic risk, of an investment.It is the component of risk that is correlated to market movements, and which is not eliminated through diversification. Let us again see this as an example:

As an example, consider the 3-year statistics for a small cap growth fund If alpha is calculated using the S&P 500 as the market measure, the fundhas a high beta (1.53) and negative alpha (-2.86%).Based on this you would

TABLE 1

S&P 500

RUSSEL 2000 Growth

R2

70

89

Beta

1.53

0.80

Alpha

-2.86

2.36

conclude this is a volatile fund and the manager has actually destroyed value.Investors would be better off in a passive S&P 500 index fund or ETF than in this fund.But this is a small cap fund with a significantly higher R2 to the Russell 2000 Growth Index.Against that, the fund’s alpha is a positive 2.36% and the beta is actually below that of the index.This suggests the manager has added value with below-average volatility – the exact opposite of the initial conclusion.

Which is correct?They both are.They are both accurate applications of Equations 1 – 3 simply using different values for the market return (Rm).

======================================================

2-) I was looking for the use of alternative methods of evaluating mutual fund performance management.
For instance,
Global Investor (Oct 2004) discusses the strength and the weaknesses of the Sharpe ratio by stating as follows:
"As a robust indicator, which does not depend on any choice of benchmark, the Sharpe ratio is considered to be an absolute portfolio performance measure, but this strength probably leads to its principal weakness. The fund with the best Sharpe ratio is not necessarily the one that performed best in comparison with the precise risk. The concern to relativise the performance with regard to the risk taken by the manager has led researchers to attempt to go beyond market risk analysis and favour more sophisticated models. These allow all of the portfolio risks to be highlighted and the normal returns arbitrated by the market to be evaluated. Consequently, the excess performance (abnormal return or alpha) achieved by stock picking or market timing could be measured in relation to the risks taken by the manager. The Europerformance/Edhec rating attribution methodology is based on the following steps: 1. return-based style analysis and calculation of alphas, 2. persistence analysis, 3. extreme risk analysis, and 4. rating attribution."
References:
Assessing mutual fund performance. (2004). Global Investor, , 1-51. Retrieved from http://search.proquest.com/docview/229686026?accountid=27965

I read the above description. WHAT IS THE QUESTION ?? What do you want me to explain ??

==========================================================

3-) Which areas, countries of the world would offer a higher level of diversification for an US investor?

That is which countries would be less correlated with the US equity markets?

Historically, globally diversified portfolios have dominated domestic-only ones on the efficient frontier. Compared to a domestic-only portfolio, a global portfolio should earn a higher return for the same level of risk and take less risk for the same level of return. But today, many investors feel anxious about investing internationally, the result of relatively poor market performance outside the US this past year and also with a purpose to achieving balanced diversification while balancing and mitigating resultant risk.

For this, it will need to invest in the Markets which are less correlated with the US. Foreign countries in the BRIC (Brazil, Russia, India and China) group are primarily known for their growth opportunities. These countries have experienced significant levels of economic growth, which has helped many companies within prosper. However, as with any developing nation, there are increased risks associated with the ability to successfully manage growth in the long-term.

=============================================================

4-) But aren't the globalized markets becoming more correlated which undermines the main notion of international diversification of the domestic asset portfolio?
Your opinion?

YES.. that is correct. It is beyond doubt that the international portfolio and the resultant diversification reduces risk in the portfolio to a large extent. However, with the time going by, this correlation which existed in different countries which provided reduced risk through balanced diversification is slowly fading away as the world and countries are more gettingglobalized. The risks such as currency exchange rate risk, Geopolitical risks, economic and credit risks which came with international diversification are now being more efficiently managed.

The main reason behind this being more correlated is that the business are getting globalized. Growth of one geographical set of countries depends upon the other and so on. For example, if you own Brazil, you own a derivative of China and that you can’t like China unless you believe their best customers (the US and Europe) can remain somewhat healthy.

Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3906
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Rakhi Vasavada and other Finance Specialists are ready to help you
Customer: replied 1 year ago.

Please I need help with a last important project of this semester, it is 3hour once I opened i must finish, Could you help me out?? Thank you

Expert:  Rakhi Vasavada replied 1 year ago.
Dear Friend,

Sure, post it after 45 mins.. I shall be able to begin after that and deliver you within you deadline.

Regards
Expert:  Rakhi Vasavada replied 1 year ago.
Dear Friend,

You may kindly post now. I am free and available.

Warm Regards
Customer: replied 1 year ago.

this is my last project I only have 3 hours to finish, I need to explain in details and with accurate every single question, thank you: http://www.mediafire.com/view/?6bdhe6dm5nsto7a


 


Thank you

Customer: replied 1 year ago.

Did you receive the link of the Project that I just sent you,, I have that doubt.. ?? Thank you

Expert:  Rakhi Vasavada replied 1 year ago.
yes.. I have received.
Expert:  Rakhi Vasavada replied 1 year ago.

Dear Friend,

I am terribly sorry. I have facing constant problem with my connection and just have a power failure. I am currently on power backup which will not last long.

I am opting out so that other experts can help you in time.

Hope to assist you again in future.

Warm Regards

Customer: replied 1 year ago.

Please This is a timing project, Is there anyway that I can solve this problem,, It is a lot of point ? Please help me out with alternative.??? please

Expert:  Rakhi Vasavada replied 1 year ago.
Dear Friend,

I am really terribly sorry. I just have five minutes of power backup left and I shall be offline. I have opted out and see if other experts can help you with this.

I am seriously sorry.

Warm Regards
Customer: replied 1 year ago.

Why you did not tell me that before? I am going to lost a lot of point,, Thank you anyways..

Customer: replied 1 year ago.

Please could you help me out with two questions>> thank you

Expert:  Rakhi Vasavada replied 1 year ago.
Drag friend,

Kindly let me know.

Regards
Customer: replied 1 year ago.

Question 1-) can you find some examples where the legal and regulatory process successfully stopped the Merger or Acquisition? What was the rationale for this action?


(Your focus should be primarily the legal and regulatory process of the US Federal Government; however, you can also find examples of actions taken by States (in the US) and actions taken by foreign governments, such as Canada, the European Union, etc.)


Your examples should be from the 1995 - 2012 period.



2-) The AOL – Time Warner Merger: What was right with this merger? What was wrong with it? What was the industry and competitive environment like internationally when this merger was announced?

Expert:  Rakhi Vasavada replied 1 year ago.
Dear Friend,

Though this is purely a financial question, this will take time.

I shall revert on this later as I shall need time.

Regards...
Customer: replied 1 year ago.

It is open question about your own creation opinion. Thank you

Expert:  Rakhi Vasavada replied 1 year ago.
Sure.....
Customer: replied 1 year ago.

Hello. Do you have the answer of my two questions, the opinion.. Thank you...

Expert:  Rakhi Vasavada replied 1 year ago.
Dear Friend,

Sorry for the delay. I am being indicated that this is a question that requires 'writing experts". I am opting out so that other expert can assist you with this.

Warm Regards
Customer: replied 1 year ago.

Please could you help me out with this project , it is due by the end of the day: the link is:http://www.mediafire.com/view/?uoll5jul3bo49et..Thank you

Customer: replied 1 year ago.

http://www.mediafire.com/view/?uoll5jul3bo49et.. Could you help me with this project??

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Rakhi Vasavada
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Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years