Questions from General Investment

Q: The administrator of a large pension fund wants to evaluate the performance

The administrator of a large pension fund wants to evaluate the performance of four portfolio managers. Each portfolio manager invests only in U.S. common stocks. Assume that during the most recent 5-...

Q: A firm pays a current dividend of $1.00,

A firm pays a current dividend of $1.00, which is expected to grow at a rate of 5% indefinitely. If current value of the firm’s shares is $35.00, what is the required return based on the constant grow...

Q: What characteristics will give firms greater sensitivity to business cycles?

What characteristics will give firms greater sensitivity to business cycles?

Q: Rank the durations or effective durations of the following pairs of bonds

Rank the durations or effective durations of the following pairs of bonds: a. Bond A is a 6% coupon bond, with a 20-year time to maturity selling at par value. Bond B is a 6% coupon bond, with a 20-ye...

Q: Unlike other investors, you believe the Fed is going to loosen

Unlike other investors, you believe the Fed is going to loosen monetary policy. What would be your recommendations about investments in the following industries? a. Gold mining b. Construction

Q: Long-term Treasury bonds currently are selling at yields to maturity

Long-term Treasury bonds currently are selling at yields to maturity of nearly 6%. You expect interest rates to fall. The rest of the market thinks that they will remain unchanged over the coming year...

Q: Consider two firms producing smartphones. One uses a highly automated robotics

Consider two firms producing smartphones. One uses a highly automated robotics process, whereas the other uses workers on an assembly line and pays overtime when there is heavy production demand. a. W...

Q: You will be paying $10,000 a year in tuition

You will be paying $10,000 a year in tuition expenses at the end of the next two years. Bonds currently yield 8%. a. What are the present value and duration of your obligation? b. What maturity zero-c...

Q: Pension funds pay lifetime annuities to recipients. If a firm will

Pension funds pay lifetime annuities to recipients. If a firm will remain in business indefinitely, the pension obligation will resemble a perpetuity. Suppose, therefore, that you are managing a pensi...

Q: You are managing a portfolio of $1 million. Your target

You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds, a zero-coupon bond with maturity of five years and a perpetuity, each currently yielding...