# Final Problem Paper: Company Finance

/MiddSuppose that in the arriving year, you anticipate Exxon-Mobil stay with have a volatility of 42% and a beta of zero. 9, and Merck's stock to have a unpredictability of 24% and a beta of just one. 1 . The danger free interest rate is 4% and the markets expected come back is 12%.

The cost of capital for a task with the same beta since Merck's inventory is closest to:. | d. 12. 8% | E[R] = Rf + Beta Г— Risk Premium =. 04 + 1 ) 1 Г— (. doze -. 04) =. 128 | Which in turn stock gets the highest total risk?

| c. Exxon-Mobil since it contains a higher movements |

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If the stock pays dividends at the end of each one fourth, with recognized returns of R1, R2, R3, and R4 each quarter, then your annual understood return can be calculated because Choose one response. | c. Rannual sama dengan (1 + R1)(1 + R2)(1 & R3)(1 + R4) - 1 | | -------------------------------------------------

Consider the next realized gross annual returns:

Yr End| S& P 500 Realized Return| IBM Noticed Return| 1996| 23. 6%| 46. 3%

1997| twenty-four. 7%| 21. 7%

1998| 30. 5%| 86. 9%

1999| on the lookout for. 0%| 3. 1%

2000| -2. 0%| 0. 2%

2001| -17. 3%| -3. 2%

2002| -24. 3%| -27. 0%

2003| 32. 2%| 28. 9%

2004| 4. 4%| -5. 1%

2005| six. 4%| -11. 3%

The normal deviation in the returns on IBM from 1996 to 2005 is closest to: | m. 33. 2% | Rannual = = = 16. 45% Year End| APPLE Realized Return| (R - R)| (R - R)2| 1996| 46. 3%| 30. 85%| zero. 0891023

1997| 26. 7%| 10. 25%| 0. 0105063

1998| 86. 9%| seventy. 45%| zero. 4963203

1999| 23. 1%| 6. 65%| 0. 0044223

2000| 0. 2%| -16. 25%| 0. 0264063

2001| -3. 2%| -19. 65%| 0. 0386123

2002| -27. 0%| -43. 45%| zero. 1887903

2003| 27. 9%| 11. 45%| 0. 0131103

2004| -5. 1%| -21. 55%| zero. 0464403

2005| -11. 3%| -27. 75%| 0. 0770063

Variance = SUM of( R - R)2 / T - 1 = 0. 9907165 / 9 = 0. 1100796 Standard deviation = = sama dengan 0. 3317825

The variance from the returns within the S& L 500 via 1996 to 2005 is closest to: Choose one answer.

| a.. 0375 | Rannual = sama dengan = = 8. 8% Year End| S& G 500 Understood Return| (R - R)| (R - R)2| 1996| 23. 6%| 14. 78%| 0. 0218448

1997| twenty four. 7%| 12-15. 88%| 0. 0252174

1998| 30. 5%| 21. 68%| 0. 0470022

1999| 9. 0%| 0. 18%| three or more. 24E-06

2000| -2. 0%| -10. 82%| 0. 0117072

2001| -17. 3%| -26. 12%| 0. 0682254

2002| -24. 3%| -33. 12%| 0. 1096934

2003| thirty-two. 2%| twenty-three. 38%| zero. 0546624

2004| 4. 4%| -4. 42%| 0. 0019536

2005| 7. 4%| -1. 42%| zero. 0002016

Variance = SUM of (R - R)2 / Capital t - one particular = zero. 3405116 as well as 9 sama dengan 0. 0378346 | The average annual returning on the S& P five-hundred from 1996 to 2005 is nearest to: Select one answer.

| b. 8. 75% | Rannual = sama dengan = sama dengan 8. 82%

Guess that you want to use the 10 year famous average come back on the S& P five-hundred to forecast the anticipated future return on the S& P 500. The standard mistake of your approximate of the anticipate return is closest to: Choose one answer.

| c. 1 ) 95% | Rannual sama dengan = sama dengan = almost 8. 8% Season End| S& P five-hundred Realized Return| (R - R)| (R - R)2| 1996| twenty-three. 6%| 16. 78%| zero. 0218448

1997| 24. 7%| 15. 88%| 0. 0252174

1998| 30. 5%| 21 years old. 68%| zero. 0470022

1999| 9. 0%| 0. 18%| 3. 24E-06

2000| -2. 0%| -10. 82%| zero. 0117072

2001| -17. 3%| -26. 12%| 0. 0682254

2002| -24. 3%| -33. 12%| 0. 1096934

2003| 32. 2%| 23. 38%| 0. 0546624

2004| 4. 4%| -4. 42%| zero. 0019536

2005| 7. 4%| -1. 42%| 0. 0002016

Variance sama dengan SUM of (R - R)2 as well as T -- 1 = 0. 3405116 / being unfaithful = zero. 0378346 Normal deviation = = sama dengan 0. 1945112

Standard error = Standard Deviation as well as T sama dengan 0. 1945112 / 12 =. 01945 or 1 ) 95% | -------------------------------------------------

Consider the following share price and shares excellent data: Stock Name| Selling price per Share| Shares Excellent (Billions)| Lowes| \$28. 80| 1 . 53

Wal-Mart| \$47. 90 | 4. seventeen

Intel| \$19. 60 | 5. seventy seven

Boeing| \$75. 00 | 0. seventy nine

Assume that you have \$100, 500 to invest and you are interested in building a value-weighted stock portfolio of these four...

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