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VI Financial Management assistance

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1. Holding Period Return
Based on the following information calculate the holding period return:

P0 = $11.00
P1 = $11.40
D1 = $1.02

2. Risk and Return, Coefficient of Variation
Based on the following information, calculate the coefficient of variation and select the best investment based on the risk/reward relationship.

3. Holding Period Return
Based on the following information calculate the holding period return:

P0 = $10.00
P1 = $12.00
D1 = $1.22

4. Measures of Risk. Address each source of risk that is measured and relate it to two models addressed in this unit.
Your response should be at least 250 words in length.

5. Sources of Risk & Diversification - convertible bond.
Address each source of risk from the portfolio perspective and how diversification impacts them.

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Solution Preview

1. Capital gain yield = (P1 - P0)/P0 = (11.40 - 11.00)/11.00 = 0.0363 = 3.63%
Dividend yield = 1.02/11.00 = 0.0927 = 9.27%
Total holding period return = 3.63 + 9.27 = 12.9%
2. Missing information
3. Capital gain yield = (12-10)/10 = 0.2 = 20%
Dividend yield = 1.22/10 = 0.122 = 12.2%
Total holding period return = 20% + 12.2% = 32.2%
4. Understanding sources of risk is important for investors to understand their expectations on asset returns. There are three major sources of risk which affect a financial asset's return. These are interest rate risk, market risk and inflation risk.
 Interest rate risk: Interest rate risk is the risk of losses due to changes in interest rate levels. This risk affects security return inversely, i.e. if interest rates go up, prices of securities go down and if interest rates go down prices of securities go up.
 Market Risk: The variability resulting from fluctuations in the overall market is called market risk. The market gets affected by multiple factors which could be ...

Solution Summary

The solution discusses assistance with financial management.

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1.How successful is the Shouldice Hospital? Generate a P&L statement using available information from the case. Treat each of the two operations hospital and the surgery separately.

2.How do you account for its successful performance?

3.Prepare a patient process flow diagram from arrival through surgery and determine the capacities at each stage. For this diagram, only indicate major points in the process, e.g., admitting, examination, operating room surgeries, etc. Use the actual hours of operation for each step in the process to determine the capacity of each step. Where is the bottleneck?

4.Do a detailed analysis of potential on-site capacity expansion alternatives (on a per week basis). Assume an average of 3.5 days stay at the hospital for each patient, including surgery, and Sunday admits. This means that half the patients spend three days while the other half spend four days.

It may help to use an exhibit similar to the following to do this analysis.
Item Sun Mon Tue Wed Thu Fri Sat Sun Mon
Admits
Operations
Departures
No. of beds in use
Total no. of beds available

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