Share
Explore BrainMass

Risk Analysis

Fair Market Value of Apple

How would I determine the fair market value of Apple Inc. (AAPL) stock prices using the RIM model and Price Ratio Analysis, (given that Apple doesn't pay dividends)? Is Apple undervalued, over valued or current at the level it should be?

CAPM and SML Model

A regression was run between Stock B and the market proxy portfolio, the S&P 500. The regression line is defined as: Y = 8.3 + 1.2X. If the risk-free rate is 4 percent, the market risk premium is 6 percent, and the market return on Stock B is 10.5 percent, (a) graph the security market line (SML) for Stock B. (b) determine

Market Efficiency

Four companies are in fast expanding sectors. Each has a steady price to earnings ratio (P/E). Each company is about to publicize new products that could boost their earning per share (EPS). In one case a company will make known that the FDA has rejected a proposed new drug. In each case, analysts will be able to immediately pro

Risk and Expected Returns

US Operations of Audi has been requested by the home office in Frankfurt to estimate the expected return on investment (ROI) and risk for 2010. Audi makes the most fuel-efficient motor vehicles in the US market, sales and profits and would benefit from higher fuel prices. On the other hand, a revelation of further sudden accel

Rates of Return

You are considering a security with the following possible rates of return: Probability Return (%) 0.30 9.5 0.15 12.0 0.25 15.0 0.30 16.0 Calculate the expected rate of return and the standard deviation of the returns. Probability Return (%) 0.15 6

Financial Statement Analysis

Your parents are considering investing in PepsiCo common stock. They ask you, as an accounting expert, to make an analysis of the company for them. The financial statements of PepsiCo can be found at the company's website, www.pepsico.com. Note that all dollar amounts are in millions. Instructions Refer to PepsiCo's finan

Question about Black Scholes

A call option matures in 6 months. The underlying stock price is $85, and the stock's return has a standard deviation of 20 percent per year. The risk-free rate is 4 percent per year, compounded continuously. If the exercise price is $0, what is the price of the call option?

Current Stock Price

Estimating current stock price with beta, risk free rate, and market premium.

Law and economic models of tort

ECON 303: Law and Economics Assignment 2: SC 2009 Due: Friday October 9th; Econ Department Office, level 6, OGG Each question is worth 20 marks. 1. Beetle loves listening to music on his IPOD. He walks along the street, plugged in, and oblivious to what is happening around him. Beetle steps onto the road, doesn't hea

Computations for the six ratios listed under each part Hershey & Tootsie 2007

Prepare a four-column worksheet in Excel, column 1 to write the ratio names, column 2 to show the calculation of each ratio for Tootsie Roll Industries, column 3 to show the calculation of each ratio for The Hershey Company, and column 4 to include your DETAILED comments about each ratio and what the ratio tells you about each c

INVESTMENT ANALYSIS

ANNA is planning to form a new firm with initial investment of $8Million, there are two projects available for her to choose. the first project offers a 40% chance of a $12.5 million payoff and a 60% chance of a $6 million payoff. the second project offers a 40% chance of a $20 million payoff and a 60% chance of a $4 payoff.

Finance with a mixed portfolio

If the market value of common stock of a real estate company is 6 million and the value of its debt is 4 million with a beta of 1.5 and the risk premium on the market is 6% and the treasury bill rate is 4% and the debt is risk free and the real estate company pays no tax What is the required return on the real estate compan

Calculating beta and net present value

If T-Bills have a 4% rate and the expected portfolio return is 12% How would I use the capital asset pricing model to determine What the required investment with a beta of 1.5 and how do i determine NPV with a beta of .8 and the retun is projected to be 9.8% and with a 11.2% market retun from stock x, what is the be

Pricing

1. Calculating standard deviation and rates of return Year 2004 2005 2006 2007 2008 Rate of Return A 70% -50% 50% 40% 20% Rate of Return B 105% 80% -10% -20% 50% Calculate the arithmetic return and the standard deviation of returns. 2. Expected return and pricing Your discount rate is 12% Dividend

Calculating Risk and Return

Risk Analysis: Given the following information, calculate the expected value for Firm C's EPS. Data for Firms A and B are as follows: E(EPSA) = $5.10, and oA =$3.61; E(EPSB) = $4.20, You are given that oC = $4.11. Discuss the relative riskiness of the three firms' earnings. You are given that oC = $4.11. Discuss the relative r

portfolio (weighted average) expected rate of return

You are considering investing in a portfolio of the common stocks of four publicly-traded companies with betas as follows: ABC: 0.7 DEF: 0.9 GHI: 1.3 JKL: 1.9 If the risk-free rate is 4% and the market rate is 10%, what is your expected rate of return in: ABC? DEF? GHI? JKL? e. If your po

BP NPV and Interest Rates: The Increase Volatility

BP recently evaluated a proposal for switching to a new system of storage for refined petroleum products (which loses less product to evaporation). According to their analysis of the project, the initial investment required for the project is $50 million, and the project is expected to yield $10 million in returns (the value of

If the beta of Amazon.com is 2.2, risk-free rate is 5.5% and the market risk premium is 8%, calculate the expected rate of return for Amazon.com stock: If the beta of Exxon Mobil is 0.65, risk-free rate is 4% and the market rate of return is 14%, calculate the expected rate of return from Exxon:

1a. If the beta of Amazon.com is 2.2, risk-free rate is 5.5% and the market risk premium is 8%, calculate the expected rate of return for Amazon.com stock: A. 15.8% B. 14.3% C. 35.2% D. 23.1% 1b.If the beta of Exxon Mobil is 0.65, risk-free rate is 4% and the market rate of return is 14%, calculate the ex

Risk & Variance

1. As the number of stocks in a portfolio is increased: A. Unique risk decreases and approaches to zero B. Market risk decreases C. Unique risk decreases and becomes equal to market risk D. Total risk approaches to zero 2. A statistical measure of the degree to which securities' returns move together is called:

Risk Analysis: Required Return

Adriatic Corporation's stock had a required return of 11.50% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Now suppose there is a shift in investor risk aversion, and the market risk premium increases by 2%. The risk-free rate and Adriatic's beta remain unchanged. What is Adriatic's new r

Weekly Log Return - Standard Deviation - Price a call option

Please check the document attached. Thanks (I've added risk free rate, time to expiration, current price) Date Open High Low Close Adj Close 2/17/2009 5.07 5.21 4.51 4.57 4.57 2/9/2009 6.57 7.05 5.35 5.57 5.57 2/2/2009 6.20 6.66 3.77 6.13 6.13 1/26/2009 6.46 7.81 6.00 6.58 6.58 I need to know, weekly log r

Expected Profit, Standard Deviation, Risk

A software company has to decide which of two advertising strategies to adopt: TV commercials or newspaper ads. The marketing department has estimated that sales and their probability under each alternative plan are as given in the table below: Strategy A (TV Commercials) Strategy B (Newspaper Ads) Sales Probability Sales

Two business projects: Coefficient, standard deviation, and expected value

A firm is considering two business projects. Project A will return a loss of $45 if conditions are poor, a profit of $35 if conditions are good, and a profit of $155 if conditions are excellent. Project B will return a loss of $100 if conditions are poor, a profit of $60 if conditions are good, and a profit of $300 if conditions

International Finance

Suppose that a foreign project has a beta of 1.12, the risk free return is 9.3% and the required return on the market is estimated at 18%. Then the cost of capital for the project is a. 17.21% b. 21.37% c. 19.04% d. 20.03% The cost of capital for a project depends on a. the correlation between returns on the project

Beta

You have just read the annual report of a mutual fund. It boasted of a 26% return and advertised that it had beaten the market return last year by three percentage points. In doing some research you discover the fund had a beta of +1.5 and the return on risk free Treasury securities was 15%. Assuming a market risk premium of 8

Changes in Market Value of a Call Option on a Common Stock

Option: Which of the following events are likely to increase the market value of a call option on a common stock? Explain. a. An increase in the stock's price. b. An increase in the volatility of the stock price. c. An increase in the risk-free rate. d. A decrease in the time until the option expires.

CAPM Model: Calculating Expected & Risk Free Return

A) Find the Expected Rate of Return on the Market Portfolio given that the Expected Rate of Return on Asset "i" is 10%, the Risk-Free Rate is 3%, and the Beta for Asset "i" is 1.5. B) Find the Risk-Free Rate given that the Expected Rate of Return on Asset "j" is 14%, the Expected Return on the Market Portfolio is 12%, and th

Stocks with a beta of zero offer an expected rate of return

Are the following statements true or false? Explain. a. Stocks with a beta of zero offer an expected rate of return of zero. b. The CAPM implies that investors require a higher return to hold highly volatile securities. c. You can construct a portfolio with a beta of 0.75 by investing 0.75 of the budget in T-bills and the rem