1. Estimate of the risk-free rate pf interest ("U.S. 10-year Treasury" bond rate = 4.78%. Assumed Market Risk Premium = 7.5%. 2. IBM Stock Information a. IBM’s Beta = 1.64 b. IBM’s current annual dividend = $0.80 c. IBM’s 3-year dividend growth rate (g) = 8.2% d. Industry P/E = 23.2 e. IBM’s EPS = $4.87 3. With the information you have‚ use the CAPM to calculate IBM’s required rate of return or ks. CAPM: ks = RF +{ (kM Krf) x Beta} = ks = 4.78% + {7.5% x 1.64) = 17.08% ks
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com/TopNav/Home/Default.htm http://www.pimco.com/LeftNav/BondResources/Default.htm Leibowitz‚ M.L. and A. Weinberger‚ "Contingent Immunization‚ Part I: Risk Control Procedures‚ Financial Analysts Journal‚ Nov.-Dec. 1982‚ pp. 17‑31 NB: YOU SHOULD BE ABLE TO SUMMARIZE
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Treasury and Risk Management Question 1. A trader enters into a one-year short forward contract to sell an asset for $60 when the spot price is $58. The spot price in one year proves to be $63. What is the trader’s gain or loss? Show a dollar amount and indicate whether it is a gain or loss. Answer: The trader sells the contract for $60 and buys at a spot price of $63. $60 - $63 = ($3). $3 loss Question 2. The price of a stock is $36 and the price of a three-month
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Question 3 (10 points) Moogle‚ Inc. is in the same business as Google‚ Inc.‚ but has recently retired all its debt to become an all-equity firm. Its return on equity has dropped from 12.25% to 10.60% as a result of this. Google‚ Inc. continues to have debt in its capital structure‚ and its debt-to-equity ratio is 30%. What is the return on assets of Google‚ Inc.(No more than two decimals in the percentage interest rate‚ but do not enter the % sign.) Answer for Question 3 Question 4 (10 points) Suppose
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Question 1 Consider an option on a non-dividend-paying stock when the stock price is $30‚ the exercise price is $29‚ the risk-free interest rate is 5% per annum‚ the volatility is 25% per annum‚ and the time to maturity is four months. a. What is the price of the option if it is a European call? b. What is the price of the option if it is an American call? c. What is the price of the option if it is a European put? d. Verify that put–call parity holds. Question 2 Assume
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“10 years from now” Have you ever planned out or even imagined what 10 years from now would look like? Well I have planned‚ dreamed‚ and hoped what my next 10 years would look like. I know what I want do as career‚ accomplish‚ and become. How about you? The careers that I am interested in are to become a veterinarian‚ Family Practice Doctor‚ and a lawyer. It is important to pick a career that keeps our interest and makes you work hard. I want to wake up every morning excited about my job and
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Interest Rate Risk Supporting Document to the New Basel Capital Accord Issued for comment by 31 May 2001 January 2001 Superseded document Superseded document Table of contents SUMMARY .............................................................................................................................................. 1 I. SOURCES AND EFFECTS OF INTEREST RATE RISK ............................................................. 5 A. SOURCES OF INTEREST RATE RISK .......
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embark with me onto to curvy road of my life. This is my life as i see it in ten years into the future. This is my story‚ As a senior in high school‚ I am barely thinking about how my life will be like until now. I have a lot of friends that would severly miss me after we have moved on‚ but only a few would stay by my side forever. Many of my friends were going to college when fall came back around while I was taking a year off from college to spend time with family and friends‚ but most importantly
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Interest Rate Risk (IRR) Management What is Interest Rate Risk : Interest rate risk is the risk where changes in market interest rates might adversely affect a bank’s financial condition. The management of Interest Rate Risk should be one of the critical components of market risk management in banks. The regulatory restrictions in the past had greatly reduced many of the risks in the banking system. Deregulation of interest rates has‚ however‚ exposed them to the adverse impacts of interest rate risk
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8 Appendix 9 Introduction The purpose of this project is to investigate the co-movements of Jamaica and Trinidad and Tobago Treasury bill rates‚ as well as to investigate whether the US Treasury bill rate Granger Cause the movement of the Treasury bill rates of both Caribbean islands. To study the co-movements between the Treasury rates‚ we will determine if there is a long run relationship between the two series using co-integration tests. Direct Granger tests will be used to
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