B is correct. The expected return on an inflation-linked bond issued by the government of a developed country represents the return that an investor requires on a real default-free fixed-income security and is a key component of the discount rate. A is incorrect. The required risk premium is an inpuRead more
B is correct. The expected return on an inflation-linked bond issued by the government of a developed country represents the return that an investor requires on a real default-free fixed-income security and is a key component of the discount rate.
A is incorrect. The required risk premium is an input in determining present value.
C is incorrect. The real risk-free rate is an input in determining present value
C is correct. The Sharpe ratio is unaffected by the addition of cash or leverage in a portfolio and would thus not be appropriate to evaluate a portfolio in which an allocation to cash was a key part of the investment decision process. A is incorrect because Portfolio A has neither cash nor leverageRead more
C is correct. The Sharpe ratio is unaffected by the addition of cash or leverage in a portfolio and would thus not be appropriate to evaluate a portfolio in which an allocation to cash was a key part of the investment decision process.
A is incorrect because Portfolio A has neither cash nor leverage as a component of its investment decisions.
B is incorrect because Portfolio C has neither cash nor leverage as a component of its investment decisions.
Discount Rate
B is correct. The expected return on an inflation-linked bond issued by the government of a developed country represents the return that an investor requires on a real default-free fixed-income security and is a key component of the discount rate. A is incorrect. The required risk premium is an inpuRead more
B is correct. The expected return on an inflation-linked bond issued by the government of a developed country represents the return that an investor requires on a real default-free fixed-income security and is a key component of the discount rate.
A is incorrect. The required risk premium is an input in determining present value.
C is incorrect. The real risk-free rate is an input in determining present value
See lessSharpe Ratio
C is correct. The Sharpe ratio is unaffected by the addition of cash or leverage in a portfolio and would thus not be appropriate to evaluate a portfolio in which an allocation to cash was a key part of the investment decision process. A is incorrect because Portfolio A has neither cash nor leverageRead more
C is correct. The Sharpe ratio is unaffected by the addition of cash or leverage in a portfolio and would thus not be appropriate to evaluate a portfolio in which an allocation to cash was a key part of the investment decision process.
A is incorrect because Portfolio A has neither cash nor leverage as a component of its investment decisions.
B is incorrect because Portfolio C has neither cash nor leverage as a component of its investment decisions.
See lessOption greeks (VEGA)
Measures of leverage
Contribution/(Contribution - Fixed cost) = (300000*20)/[(300000*20) - 500000 ] =6000000/5500000 =1.09
Contribution/(Contribution – Fixed cost)
See less= (300000*20)/[(300000*20) – 500000 ]
=6000000/5500000
=1.09
sTOCK pRICE
yES
yES
See lessstock’s intrinsic value
U took current year DPS i.e, 1.92 but we need to take D1 which is 1.92*1.069=2.05248 p0 = 2.05248/.081 = 25.31
U took current year DPS i.e, 1.92 but we need to take D1 which is 1.92*1.069=2.05248
See lessp0 = 2.05248/.081 = 25.31
stock’s intrinsic value
Yes the correct answer is B
Yes the correct answer is B
See lessMeasures of leverage
yES
yES
See lessconfidence interval
yes BRO
yes BRO
See lessCredit Rating
Yes, for two equally rated speculative-grade bonds, the prob. of default is same
Yes, for two equally rated speculative-grade bonds, the prob. of default is same
See less