15 May Instructions Please download the attached file and complete all exercises. Highlight the answer and provide explanations (100 words) to each of th
Instructions
Please download the attached file and complete all exercises. Highlight the answer and provide explanations (100 words) to each of the answers along with any relevant calculations to receive credit. Your part in completing the assignment is to demonstrate an understanding and application of the concepts covered. Please complete the assignment in a Microsoft Word document.
Chapters 3 & 4
Instructions: Calculate each exercise. Highlight the answer and provide explanations (100 words) to each of the answers along with any relevant calculations to receive credit. Your part in completing the assignment is to demonstrate an understanding and application of the concepts covered.
1. A good measure of an investor’s risk exposure if she/he only holds a single asset in her portfolio is:
a. The expected value of the asset’s returns.
b. The standard deviation of possible returns on the asset.
c. The correlation coefficient with the market portfolio.
d. The normal probability distribution function.
2. The beta for ABM Industries is 1.50. Assuming that the nominal riskfree rate is 6.0% and that the return to the market is 9.0%, what is ABM’s required return?
a. 7.5%
b. 18.4%
c. 10.5%
d. 3.2%
3. Koda’s Manufacturing has a required return of 9.50%. If the market return is 13.0% and the nominal riskfree rate is 6.0%, what is Koda’s beta?
a. 0.5%
b. 8.3%
c. 7.2%
d. 2.2%
4. Which of the following items reflects the time value of money?
a. Real riskfree rate.
b. Inflation premium.
c. Default risk premium.
d. Liquidity premium.
Use the following data to answer questions 5 and 6. Assume the following premiums reflect current market conditions:
· r* = 3.15%;
· IP (1year bonds) = 2.35%;
· IP (3year bonds) = 2.65%;
· IP (5year bonds) = 2.90%;
· DRP (AAA corporate bonds) = 0.60%;
· DRP (AA+ corporate bonds) = 0.85%;
· LP (AAA corporate bonds) = 0.22%;
· LP (AA+ corporate bonds) = 0.30%;
· MRP = 0.1% × (t − 1) where t is the number of years to maturity.
5. Calculate the interest rate for a 1year AA+ corporate bond.
a. 3.52%
b. 10.48%
c. 6.65%
d. 9.75%
6. Calculate the interest rate for a 5year AA+ corporate bond.
a. 3.52%
b. 7.60%
c. 5.35%
d. 2.75%
Your assignment will be evaluated according to the following Assignment Requirements:
Guidelines 
Assignment Grading Criteria 
Points 
Content (60%) 
Response demonstrates a clear understanding of the key elements of assignment questions 
12 
Response thoroughly covers the question elements in a substantive manner 
12 

Answers demonstrate critical thinking and analysis 
12 

Answers are complete and accurate 
12 

Answers provide adequate information on the given topic 
12 

Section Total 
60 

Organization & Calculations (30%) 
Explanations flow in a logical sequence 
7 
Answers are correct and address major points of exercise 
8 

Answers and/or formulas are present and have a logical flow 
8 

Student explanations address major points 
7 

Section Total 
30 

Assignment Format, Writing Style, & Grammar (10%) 
Sentences are well constructed, complete, clear, and concise 
1 
The tone is appropriate to the content and assignment 
1 

Grammar, spelling, and punctuation are correct 
2 

Assignment is submitted in Micrsoft Word format 
5 

Section Total 
10 

Total Score 