Category: Uncategorized

What do we mean by discounted cash flow, or DCF, valuation?

You invest a sum of money today and receive three times your money in 12 years.  What annual rate of return are you earning?

You calculate a delta of 0.8 for a call option.  How many shares and how many calls are needed to form a risk-free portfolio?  What positions (long or short) does the investor have in the shares and in the calls?

What is meant by a long position in futures and a short position in futures?  For each position, does the trader benefit when the price of the underlying asset increases or when it decreases?

A portfolio manager oversees a $200 million equity portfolio with a weekly return standard deviation of 8 percent. Assuming portfolio returns are normally distributed and the expected weekly return is zero, what is the dollar loss expected with a 2.5 percent probability?

The risk-free rate is 4 percent and the expected return on the market is 11 percent. If a stock has a beta of 1.3, what is its percentage expected return according to the CAPM?

Suppose the risk-free rate is 5%, and the expected return on the market is 13%.  If a particular stock has an expected return of 17%, what must its beta be?

Given the following information: Probability ofStock A Return ifState of EconomyState of EconomyState OccursRecession0.30-8%Normal0.5012%Boom0.2025%Use the above information to calculate the expected return for Stock A.

Under what conditions will an announcement have no effect on common stock prices?

What is an efficient portfolio, and how does it differ from an inefficient one?