Financial Markets

Financial Markets (N13302) Mock write up (2010/2011) Question 1 (a) BSC Industries has just turn overing its annual dividend of $10 per bundle. The dividend is umpire to grow at a constant evaluate of 5% indefinitely. The beta of BSC industries lineage is 1.3, the safe enjoin is 2%, and the marketplace risk pension is 7%. (1) What is the inherent value of the stemma? (2) What would be your estimate of inborn value if you believed that the stock was riskier, with a beta of 1.7? [40%] (b) CBD stock has an rest ROE of 15% per year, promise earnings per sh are of $6, and anticipate dividend of $4 per divvy up. The beta of CBD stock is 1.3, the risk-free rate is 2%, and the market risk premium is 7%. What are its anticipate growth rate, its price, and its P/E ratio? [40%] (c) Discuss why P/E multiples are in general negatively correlated with risk and positively correlated with growth. [20%] Question 2 Mr. metalworker regards to invest in both characters: share X and share Y. Share X has an expect fall of 12% with a variance of 0.0096, and share Y has an expected return of 9% with a variance of 0.0081. enounce the covariance between X and Y is -0.0034.

count the expected return and standard deviation of his portfolio if he invests: (a) 40% in share X and 60% in share Y. [40%] (b) 70% in share X and 30% in share Y. [40%] (c) Calculate the correlation coefficient between X and Y. [20%] Question 3 a) enounce your live wants to invest in marrys. 1 of the choices is a corporate bond with a coupon rate 2%, 2-year adulthood with equating value of £1000 pay annual coupon payment. Suppose the interest rate is 1%. The other choice is a corporate bond 10-year due date with par value of...If you want to get a occupy essay, order it on our website: Ordercustompaper.com

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