Ask Question, Ask an Expert


Ask Basic Finance Expert

You are required to set up a separate worksheet (spreadsheet model) for each of the following two problems:  

problem 1: find out the yield to maturity of a 7-year $1,000 par value bond with an annual coupon rate of 7.5% and a current price of $1,125. Provide the spreadsheet solutions for both annual and semi-annual payments of interest. Comment on the relationship between the yield to maturity and the timing of interest payments, providing an appropriate table or graph.

problem 2: Obtain from Bloomberg (or Datastream, or Thomson ONE Banker, or Yahoo!Finance) the beginning of month values for the period 2009-2012 of the Standard & Poor’s (S&P) SMALL CAP 600 Index and New York Stock Exchange (NYSE) World Leaders Index. Assume that you are a risk-averse investor.

For each of the two assets represented by the indices, find out annual returns and build a frequency distribution of annual returns. Provide graphs of the distributions.
Explore the risk-return relationship for the two assets. Plot your results on a graph with the standard deviation of annual returns of each asset on the horizontal axis and the average annual return on the vertical axis, and comment on which asset performed better. 
Assume that you form a portfolio by investing equal amount of money in each asset. Determine the average and standard deviation of the portfolio’s annual returns. Provide your interpretation of the risk and return of the equally-weighted portfolio compared to those of the individual assets. 
find out and graph the average annual returns and standard deviations of all portfolios that are combinations of the S&P SMALL CAP 600 Index and NYSE World Leaders Index with the proportion of the S&P SMALL CAP 600 Index being 0, 10, 20, 30, 40, 50, 60, 70, 80, 90, 100%. Comment on the profile of the risk-return trade-off between the portfolios.

Indicative Reading:

A) For advice on design approaches that can assist with production of useful to financial managers Excel applications you might wish to consult Day’s Mastering Financial Modelling in Microsoft Excel and the latest edition of Benninga’s Principles of Corporate Finance with Microsoft Excel. 

B) For working knowledge of the concepts and theories of corporate finance involved with this assignment you will need to read the relevant chapters of the latest edition of Corporate Finance by Berk and DeMarzo, the core text supporting BAM021 Corporate Finance. 
C) Basic statistics concepts and Excel tools for basic statistical analyses are covered in Chapter 16 of Day’s Mastering Financial Mathematics in Microsoft Excel and in Chapter 9 of Benninga’s Principles of Corporate Finance with Microsoft Excel. 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M9368

Have any Question? 

Related Questions in Basic Finance

Formulate a polling station location problem taking into

Formulate a polling station location problem, taking into account the following binding constraints: (a) the number of polling stations is fixed for each municipality and calculated according to the number of resident vo ...

Determine the mass transfer coefficient kc for the transfer

Determine the mass transfer coefficient, kc, for the transfer from a glucose sphere, 0.3 cm in diameter, which is sub merged in a 25°C aqueous stream flowing at a bulk velocity of 0.15 m/s. The mass diffusivity of glucos ...

Explain how an organization determines whether a hedge is

Explain how an organization determines whether a hedge is sufficiently effective to justify hedge accounting? Describe the primary differences between accounting for fair value hedges and accounting for cash flow hedges? ...

1 why is it important to focus on total returns when

1. Why is it important to focus on total returns when measuring an investment's performance? 2. Why do real returns matter more than nominal returns? 3. Under what conditions will the components of a bond's return have t ...

Option valuation projectquestion 1 calculate the normal

Option Valuation Project Question 1: Calculate the normal distribution and cumulative distribution for "d" ranging from -5 to +5 in increments of 0.2. Assume the distribution is standard normal (mean = 0, variance =1). U ...

Stock a has a beta of 15 and stock b has a beta of 10

Stock A has a beta of 1.5, and Stock B has a beta of 1.0. Determine whether each statement below is true or false. a. Stock A must have a higher standard deviation than Stock B. b. Stock A has a higher expected return th ...

What is diversifiable risk what is the role of

What is diversifiable risk? What is the role of diversification in the capital asset pricing model? If investors are risk averse, which would they prefer: a stock with an expected return of 5% with a beta of 1.2 or a sto ...

1 what is experimental contamination2 does a nonequivalent

1. What is experimental contamination? 2. Does a nonequivalent groups pretest-posttest design eliminate local history as a potential explanation of the results? Explain.

1 what are the most common causes of missing data and what

1. What are the most common causes of missing data, and what difficulties do missing data cause? What can be done if data are missing? 2. Comment on the circumstances under which a researcher would consider deleting one ...

Practice sentence variety-rewrite the following paragraph

Practice sentence variety:- Rewrite the following paragraph by varying sentence types and sentence lengths to keep the writing interesting. Smartfood was founded by Ann Withey, Andrew Martin, and Ken Meyers in 1984. The ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen