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cost of capital
Wang Securities increased its debt-to-equity (D/E) ratio from 0.65 to 0.75 due to recent bank borrowing. Let's examine the effects on both the asset beta and the equity beta: Asset Beta measures the risk of the company's assets without considering its capital structure. It is a reflection of the comRead more
Wang Securities increased its debt-to-equity (D/E) ratio from 0.65 to 0.75 due to recent bank borrowing. Let’s examine the effects on both the asset beta and the equity beta:
Asset Beta measures the risk of the company’s assets without considering its capital structure. It is a reflection of the company’s core business risk.
Equity Beta measures the risk of the company’s equity (common stock) and takes into account the company’s capital structure, including its debt. It reflects both the core business risk (as captured by the asset beta) and the financial risk arising from the company’s leverage (debt).
Now, let’s consider the effects:
Given these considerations, option B is the most accurate:
B. The asset beta will remain the same, and the equity beta will rise.
Option A is incorrect because it suggests both the asset beta and the equity beta will rise, which doesn’t align with the typical relationship between debt and asset beta.
Option C is also incorrect because it suggests that the equity beta will decline, which is unlikely when leverage increases.
See lessReal Estate Through Publicly Traded Sec
The correct answer to this question depends on the specific details and circumstances of REIT B's investment in the storage subsector. Let's analyze both options: New competitive facilities (Option A): In the storage subsector, the addition of new competitive storage facilities in the vicinity can iRead more
The correct answer to this question depends on the specific details and circumstances of REIT B’s investment in the storage subsector. Let’s analyze both options:
Given this analysis, both options A and C could be valid concerns for REIT B, depending on the specific circumstances of the storage subsector and the REIT’s properties. The correct answer may ultimately depend on the context provided in the question or the specific factors at play in REIT B’s investment in the storage subsector. Therefore, it’s essential to consider the broader context and specific details when assessing which risk factor is most likely to adversely affect the investment in REIT B.
See lessplzz tell answer 135
To estimate the price of the illiquid 5-year, 4.5% annual-pay coupon bond, you can use linear interpolation based on the yields of Bond A and Bond B, which have similar credit quality. Here's how to do it: Calculate the yield spread between Bond A and Bond B: Yield Spread = Yield of Bond B - Yield oRead more
To estimate the price of the illiquid 5-year, 4.5% annual-pay coupon bond, you can use linear interpolation based on the yields of Bond A and Bond B, which have similar credit quality. Here’s how to do it:
Given the information provided:
Now, calculate the yield spread:
Next, estimate the yield of the illiquid bond:
Finally, calculate the price of the illiquid bond:
So, the price of the illiquid bond per 100 of par value is closest to: B) $99.7152
See lessMultinational operations
A. FIFO and its functional currency were the US dollar: The weighted-average rate when inventory was acquired is 0.654. The average rate in 2007 is 0.662. B. LIFO and its functional currency were the US dollar: The same exchange rates apply for LIFO as for FIFO since the functional currency is the URead more
A. FIFO and its functional currency were the US dollar:
B. LIFO and its functional currency were the US dollar:
C. FIFO and its functional currency were the Singapore dollar:
Now, let’s calculate the cost of goods sold (COGS) and gross profit margin for each option:
A. FIFO and its functional currency were the US dollar:
B. LIFO, and its functional currency were the US dollar:
C. FIFO and its functional currency were the Singapore dollar:
- COGS = Beginning inventory * 0.654 (weighted-average rate when inventory was acquired) + Purchases during 2007 * 0.662 (average rate in 2007) – Ending inventory * 0.671 (31 December 2007 rate), but there might be additional exchange rate conversions due to the functional currency being the Singapore dollar.
See lessCost of capital and corporate restructuring notes
I understand you're looking for notes on "Cost of Capital" and "Corporate Restructuring." However, I cannot provide specific notes or materials, especially if they are not publicly available or authorized for sharing. To obtain these notes, here are some steps you can take: Contact Your Instructor oRead more
I understand you’re looking for notes on “Cost of Capital” and “Corporate Restructuring.” However, I cannot provide specific notes or materials, especially if they are not publicly available or authorized for sharing.
To obtain these notes, here are some steps you can take:
Remember to respect copyright and intellectual property laws when obtaining and using study materials.
Corporate Issuers – NPV
The statement "C is correct" is indeed accurate. Let's break down the reasons why option C is the correct answer: C. The stock price could remain steady, move higher, or move lower. While Ms. Ndereba's analysis confirmed that the project has a positive NPV, there are several factors to consider: MarRead more
The statement “C is correct” is indeed accurate. Let’s break down the reasons why option C is the correct answer:
C. The stock price could remain steady, move higher, or move lower.
While Ms. Ndereba’s analysis confirmed that the project has a positive NPV, there are several factors to consider:
Given these factors, it’s entirely possible for the stock price to remain steady, move higher, or move lower, even after Ms. Ndereba’s analysis confirmed a positive NPV for the project. Investors’ reactions to the information and their expectations for the company’s future performance will play a significant role in determining the stock’s future price movements.
See lessTechnical analysis notes
I'm unable to share or provide specific handwritten notes as I don't have access to external files, documents, or links, and sharing copyrighted or personally created content without permission may not be legal or ethical. If you're looking for resources on technical analysis, I recommend the followRead more
I’m unable to share or provide specific handwritten notes as I don’t have access to external files, documents, or links, and sharing copyrighted or personally created content without permission may not be legal or ethical.
If you’re looking for resources on technical analysis, I recommend the following:
Remember that technical analysis is just one approach to analyzing financial markets, and it has its strengths and limitations. It’s crucial to combine it with other forms of analysis and risk management strategies when making investment decisions.
Derivatives Dawn series question 5
Let's address your questions step by step: i. To determine whether the December futures were underpriced or overpriced on September 15, we can use the cost-of-carry model for futures pricing. The formula for the futures price (F) is: F = Se^(r - d) * T Where: S is the spot price (1195). e is the basRead more
Let’s address your questions step by step:
i. To determine whether the December futures were underpriced or overpriced on September 15, we can use the cost-of-carry model for futures pricing. The formula for the futures price (F) is:
F = Se^(r – d) * T
Where:
Now, calculate the futures price:
F = 1195 * e^(0.095 – 0.03) * 0.25 ≈ 1227.59
The actual futures price on September 15 was 1225, so it was slightly underpriced (1227.59 – 1225 ≈ 2.59).
ii. To profit from this mispricing, you can use an arbitrage transaction. Since the December futures were underpriced, you can buy the futures contract at the lower price and sell it at the higher theoretical price. Here’s the arbitrage transaction:
Now, let’s calculate the gains and losses if the index on December 15 closes at the specified levels:
a) If the index closes at 1260:
b) If the index closes at 1175:
In both cases, your gain or loss is -30. This means that regardless of where the index closes, you neither make nor lose money. The arbitrage transaction ensures a risk-free profit of -30, which is essentially a transaction cost.
So, to answer your initial question about why you treat the dividend yield as periodic in this case, it’s because it’s given as a historical dividend yield on the index, which implies an ongoing periodic yield. However, if it were a one-time dividend payment, you wouldn’t include it in the calculation of the futures price. It’s important to be consistent with your approach based on the information provided in each specific problem.
CFA level1
Preparing for the CFA Level 1 exam requires careful planning and dedication. Here's a general plan to help you get started for the February 2025 attempt: 1. Understand the Exam Format: Familiarize yourself with the CFA Level 1 exam format, including the number of questions, question types (multipleRead more
Preparing for the CFA Level 1 exam requires careful planning and dedication. Here’s a general plan to help you get started for the February 2025 attempt:
1. Understand the Exam Format:
2. Create a Study Schedule:
3. Curriculum and Study Materials:
4. Study Efficiently:
5. Practice, Practice, Practice:
6. Review and Revise:
7. Mock Exams and Timed Practice:
8. Ethics and Professional Standards:
9. Stay Healthy and Manage Stress:
10. Exam Day Preparation:
11. Stay Updated:
Remember that preparation and consistency are key to success in the CFA Level 1 exam. Be sure to start early and stay committed to your study plan. It’s also a good idea to reach out to others who have passed the Level 1 exam for advice and support. Good luck with your preparation!
Portfolio Management – Economics & Investment markets
Statement 1: "the additional return required from investing in a nominal default-free investment for investing in a real default-free investment." This statement is incorrect because it is describing the concept of the real risk-free rate, which is a component of the discount rate. The real risk-freRead more
This statement is incorrect because it is describing the concept of the real risk-free rate, which is a component of the discount rate. The real risk-free rate represents the return that an investor requires on a real (inflation-adjusted) default-free fixed-income security. While it is a key component of the discount rate, it is not the same as “the increased premium for more actively traded securities relative to less actively traded securities” mentioned in statement 3.
This statement is also incorrect because it is describing the expected return on an inflation-linked bond, which is indeed an important component of the discount rate. However, it is not the same as “the expected return on an inflation-linked bond issued by the government of a developed country” mentioned in statement 2. Statement 2 is essentially describing a specific type of investment, whereas the correct component of the discount rate is a more general concept – it represents the return required on a real (inflation-adjusted) default-free fixed-income security, which can include various types of bonds, not just those issued by a government of a developed country. Both statements 1 and 2 are incorrect because they provide descriptions that are either too specific (in the case of statement 2) or describe a different component of the discount rate (in the case of statement 1). Statement 3 is correct because it accurately describes the concept of a premium for more actively traded securities relative to less actively traded securities, which is one of the three key components of the discount rate.
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