| Portfolio Details | ||||||
| Stock | Expected return |
Standard deviation |
Covariance ##(\sigma_{A,B})## | Beta | Dollars invested |
|
| A | 0.2 | 0.4 | 0.12 | 0.5 | 40 | |
| B | 0.3 | 0.8 | 1.5 | 80 | ||
What is the standard deviation (not variance) of the above portfolio? Note that the stocks' covariance is given, not correlation.
A company runs a number of slaughterhouses which supply hamburger meat to McDonalds. The company is afraid that live cattle prices will increase over the next year, even though there is widespread belief in the market that they will be stable. What can the company do to hedge against the risk of increasing live cattle prices? Which statement(s) are correct?
(i) buy call options on live cattle.
(ii) buy put options on live cattle.
(iii) sell call options on live cattle.
Select the most correct response:
When someone says that they're "buying American dollars" (USD), what type of asset are they probably buying? They're probably buying:
One formula for calculating a levered firm's free cash flow (FFCF, or CFFA) is to use net operating profit after tax (NOPAT).
###\begin{aligned} FFCF &= NOPAT + Depr - CapEx -\Delta NWC \\ &= (Rev - COGS - Depr - FC)(1-t_c) + Depr - CapEx -\Delta NWC \\ \end{aligned} \\###
Acquirer firm plans to launch a takeover of Target firm. The deal is expected to create a present value of synergies totaling $105 million. A cash offer will be made that pays the fair price for the target's shares plus 75% of the total synergy value. The cash will be paid out of the firm's cash holdings, no new debt or equity will be raised.
| Firms Involved in the Takeover | ||
| Acquirer | Target | |
| Assets ($m) | 6,000 | 700 |
| Debt ($m) | 4,800 | 400 |
| Share price ($) | 40 | 20 |
| Number of shares (m) | 30 | 15 |
Ignore transaction costs and fees. Assume that the firms' debt and equity are fairly priced, and that each firms' debts' risk, yield and values remain constant. The acquisition is planned to occur immediately, so ignore the time value of money.
Calculate the merged firm's share price and total number of shares after the takeover has been completed.
The Australian dollar's value was:
Did the Australian dollar or against the US dollar between these dates?
Mr Blue, Miss Red and Mrs Green are people with different utility functions. Which of the statements about the 3 utility functions is NOT correct?
Question 831 option, American option, no explanation
Which of the following statements about American-style options is NOT correct? American-style: