Questions from Corporate Finance


Q: Suppose that in place of the S&P 500, you

Suppose that in place of the S&P 500, you wanted to use a broader market portfolio of all U.S. stocks and bonds as the market proxy. Could you use the same estimate for the market risk premium when ap...

See Answer

Q: From the start of 1999 to the start of 2009, the

From the start of 1999 to the start of 2009, the S&P 500 had a negative return. Does this mean the market risk premium we should have used in the CAPM was negative?

See Answer

Q: Assume that all investors have the same information and care only about

Assume that all investors have the same information and care only about expected return and volatility. If new information arrives about one stock, can this information affect the price and return of...

See Answer

Q: To put the turnover of Figure 13.3 into perspective,

To put the turnover of Figure 13.3 into perspective, let’s do a back of the envelope calculation of what an investor’s average turnover per stock would be were he t...

See Answer

Q: How does the disposition effect impact investors’ tax obligations?

How does the disposition effect impact investors’ tax obligations?

See Answer

Q: Consider the price paths of the following two stocks over six time

Consider the price paths of the following two stocks over six time periods: Neither stock pays dividends. Assume you are an investor with the disposition effect and you bought at time 1 and right no...

See Answer

Q: See Table 2.5 showing financial statement data and stock price

See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. a. By how much did Mydeco increase its debt from 2012 to 2016? b. What was Mydeco’s EBITDA/Interest coverage ratio...

See Answer

Q: Suppose that all investors have the disposition effect. A new stock

Suppose that all investors have the disposition effect. A new stock has just been issued at a price of $50, so all investors in this stock purchased the stock today. A year from now the stock will be...

See Answer

Q: Davita Spencer is a manager at Half Dome Asset Management. She

Davita Spencer is a manager at Half Dome Asset Management. She can generate an alpha of 2% a year up to $100 million. After that her skills are spread too thin, so cannot add value and her alpha is ze...

See Answer

Q: Allison and Bill are both mutual fund managers, although Allison is

Allison and Bill are both mutual fund managers, although Allison is more skilled than Bill. Both have $100 million in assets under management and charge a fee of 1%/year. Allison is able to generate a...

See Answer