1.Suppose, you have to pay debt of $400,000 in 4 years. You can invest money in 2 bonds:

The First bond. Bond without coupons with maturity of 3 years. The current price of it is $50,4 par value is 70.

The Second bond. It is a coupon bond with maturity of 5 years and coupon rate of 8, par value is 100, current price is 90.

Describe the plan of portfolio construction.

2.Two investment advisors are comparing performance. One averaged a 16 percent return and the other a 12.4 percent return. However the beta of the first advisor was 1.5 while that of the second was 1.1. If the t-bill rate were 7 percent, and the market return during the period were 12 percent, which advisor would be the superior stock selector?

3.What is the beta of a portfolio with E(rp)=15 percent, if rf(risk-free)=7 percent and E(rm(market))=12 percent.

4.Calculate the following criteria:

Net Present Value

Payback Period

Internal Rate of Return

Profitability index

If the cash flow of than investment project is as follows, than:

1year - (-400)4 year - (1200)

2 year -(-200)5 year - (1400)

3 year - (100)6 year - (2500)

Discount rate = 10%

5.Calculate WACC