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Solve: Expected Mean, Variance and Standard Deviation

In answering the following questions, it is given that the potential investment has the following range of possible outcomes and probabilities: 10% probability of a -20% return, 40% probability of a 15% return, 40% probability of a 25% return, and a 10% probability of a 50% return. (a) Calculate the weighted mean of the proba

GNMA mortgage pool payment, yield, servicing fee

Consider a GNMA mortgage pool with principal of $20 million. The maturity is 30 years with a monthly mortgage payment of 10 percent per annum. Assume no prepayments. a. What is the monthly mortgage payment (100 percent amortizing) on the pool of mortgages? b. If the GNMA insurance fee is 6 basis points and the servicing fee

Amount of Interest on Mortgage

You plan to purchase a $ 175,000 house using a 15- year mortgage obtained from your local bank. The mortgage rate offered to you is 7.75 percent. You will make a down pay-ment of 20 percent of the purchase price. a. Calculate your monthly payments on this mortgage. b. Calculate the amount of interest and, separately, princi-pal

Taggart's Stock Issue

5) Taggart Technologies is considering issuing new common stock and using the proceeds to reduce its outstanding debt. The stock issue would have no effect on total assets, the interest rate Taggart pays, EBIT, or the tax rate. What is likely to occur if the company goes ahead with the stock issue?

Description of Risk Analysis: Company harvest the timber

Bunyan Lumber, LLC, harvests timber and delivers logs to timber mills for sale. The company was founded 70 years ago by Pete Bunyan. The current CEO is Paula Bunyan, the granddaughter of the founder. The company is currently evaluating a 7,500 acre forest it owns in Oregon. Paula has asked Steve Boles, the company's finance offi

What is Wei's current stock price?

The Wei Company's last dividend was $1.65. The dividend growth rate is expected to be constant at 1.50% for 2 years, after which dividends are expected to grow at a rate of 8.00% forever. Wei's required return (rs) is 12.00%. What is Wei's current stock price?

banker must be satisfied with owner's character

Before approving a loan to a small business, the banker must be satisfied with the owner's character. Why is this? Do you agree or disagree? Support your post material from an outside source or personal experience.

Applications for possible Loan Approval: Select one and justify selection

See attached files. Review the following five applications. They are all for primary residential, 30-year mortgages, with full documentation. Be sure that before you decide which applications to approve, you consult the Lending Policies Manual. Your goal is to give the bank the greatest possible gain. Choose the loan(s)

Prospect Theory and Expected Utility Theory Questions

According to prospect theory, which is preferred? 1. Prospect A or B Decision (i) Choose between A. (.80, $50, $0) B. (.4, $100, $0) 2. Prospect C or D? Decision (ii) Choose between: C. (.00002, $500,000, $0) and D. (.00001, $1,000,000, $0) 3. Are these choices consistent with expected utility

Fraudulent Financial Reporting: Diebold

Read the article and answer two questions 1. Do the pressures of living up to analyst's expectations encourage fraudulent financial reporting? 2. What are your thoughts on the guilt/innocence of the Diebold executives when the two different CFOs are accused and the

Micro Brewery: Loan Payments

Micro Brewery borrows $300,000 to be paid off in three years. The loan payments are semiannual with the first payment due in six months, and interest is at 6%. What is the amount of each payment? a. $55,379 b. $106,059 c. $30,138 d. $60,276

Evaluate the benefits and limitations of portfolio diversification

Evaluate the benefits and limitations of portfolio diversification. Discuss how risk is assessed and what methods are most appropriate for measuring systematic and unsystematic risks. What are the best ways to diversify a portfolio? Please provide your team's rationale for their opinions from this week's readings.

Evaluate two companies that have applied for loans: Morris Co. and Walker Co.

Please see attached file for proper format. John Marshall is employed as a bank loan officer for CityBank. He is comparing two companies that have applied for loans and he wants your help in evaluating those companies. The two companies - Morris Company and Walker Company - are approximately the same size and had a

Benefits and Limitations of Portfolio Diversification

See the attached file. FIN/366 Weekly Overview WEEK THREE: ASSESSING AND MANAGING RISK Objectives for the Week • Describe types of risks facing financial institutions. • Analyze the methods used to measure financial interest risk. • Determine the differences between interest rates and interest income. What You

Weekly International Finance Questions

1. The futures markets have potentially unlimited risk for the speculators. If a speculator guesses wrong about the price direction of a commodity, then he or she can incur unlimited losses. When they open a futures account, speculators give their brokers access to all of their assets (to cover losses). Hedge funds use future

Financial Markets: Expected Net Income

** Please see the attached file for the complete problem description ** Consider the following income statement for WatchoverU Savings Inc. (in millions) (see attached). a. What is WatchoverU's expected net interest income at year-end? b. What will be the net interest income at year-end if interest rates rise by 2 perce

Financial Markets and Institutions

The following is ABC Inc.'s balance sheet (in thousands) (see attached). Also assume that sales equal $500, cost of goods sold equals $360, interest payments equal $62, taxes equal $56, and net income equals $22. Assume the beginning retained earnings is $0, the market value of equity is equal to its book value, and the com

American Express Stock: Mean Absolute Deviation

To determine how well the spans (3 days or 10 days) each forecast the known observations, compute the MAD (mean absolute deviation) for each forecast; see the website referenced above for the MAD formula. The file P13_16.xlsx contains the daily closing prices of American Express stock for a 1-year period. a) Using a span o

Behavioral Finance: Expected Value of Wealth

Consider a person with the following utility function over wealth: u(w) = ew, where e is the exponential function (approximately equal to 2.7183) and w = wealth in hundreds of thousands of dollars. Suppose that this person has a 40% chance of wealth of $50,000 and a 60% chance of wealth of $1,000,000 as summarized by P(0.40, $5

Finance Calculations

Calculate the present value of $5,800 received at the end of year 1, $6,400 received at the end of year 2, and $8,700 at the end of year 3, assuming an opportunity cost of 13 percent. PV = *show calculations

Blending Problem using Excel Solver: Abotte Products

Blending Problem using Excel Solver Abotte Products produces three products, A, B, and C. The company can sell up to 300 pounds of each product at the following prices (per pound): product A, $10; product B, $12; product C, $20. Abotte purchases raw material at $5 per pound. Each pound of raw material can be used to produce e

Utility Function: Ordering Prospects

An individual has the following utility function: u(w)=w^5 where w=wealth. a. Using expected utility, order the following prospects in terms of preference, from the most to the least preferred: P1(.8, 1000, 600) P2(.7, 1200, 600) P3(.5, 2000,300) b. What is the certainty equivalent for prospect P2? c. Without doing a

Profit Maximization Inappropriate Goals

1. Why is profit maximization, by itself, an inappropriate goal? What is meant by the goal of maximization of shareholder wealth?
 2. Assume the following data for Cable Corporation and Multi-Media, Inc. $ Cable Corporation Multi-Media, Inc. Net income 30,000 100,000 Sales 300,000 2,000,000 Total assets 400,000 9