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I need the answer of Q3, Q4 and Q6 with full explanation and steps. Thank you Question 1: (10 marks) With regard to market efficiency,

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I need the answer of Q3, Q4 and Q6 with full explanation and steps. Thank you

image text in transcribed Question 1: (10 marks) With regard to market efficiency, what is meant by the term \"anomaly\"? Briefly explain the following anomalies briefly: The small-firm effect The January effect The liquidity effect Book-to-market ratios The reversal effect Question 2: (8 marks) Discuss the following behavioral biases with one example for each that investors posses on average: framing, mental accounting, regret avoidance, and prospect theory (or loss aversion). Question 3: (7 marks) Three years ago you purchased a bond for $974.69. The bond had three years to maturity, a coupon rate of 8%, paid annually, and a face value of $1,000. Each year you reinvested all coupon interest at the prevailing reinvestment rate shown in the table below. Today is the bond's maturity date. What is your realized compound yield on the bond? Question 4: (20 marks) Year 2016 EBIT $ Tax rate Increase in Current Assets Increase in Current Liabilities Gross Fixed Assets 2 , 360 Mkt Price for Common share 35% $ $ $ Depreciation Increase in Debt Decrease in Preferred Shares Capital expenditure Cash in Balance Sheet $ $ $ $ Total Debt in Balance Sheet Interest Rate Total Preferred Shares in B/S $ $ 500 350 3 , 500 10% 450 190 275 7 , 500 20,000 6% 9 , 000 $ # of common shares outstanding per year per share 2,000 Beta of the stock Mkt Price for Preferred share 12 1.45 $ # of common preferred shares outstanding 15 per share 600 Div per pref share $ 1.25 Mkt Price for Bond Maturity $ Coupon rate (paid semi-annual) Face Value 6% $ 1 ,000 20 # of bonds outstanding 979 per share per bond 7 years Risk Free Rate Market Risk Premium a) b) c) d) e) f) 3% 6% 3 3 4 3 Find FCFF for 2016? Find FCFE for 2016? Calculate Cost of Common Equity, Cost of Preferred Equity and After-tax cost of debt? Calculate WACC? Consider the following FCFF growth: Next 3 years: 8% From year 4 onward: 2% Find the intrinsic or fair value of the whole firm (Enterprise Value) using DDM? Find the intrinsic or fair value per share using the FCFF approach above. Total Question 5: (5 marks) Define and discuss the Sharpe, Treynor, and Jensen measures of portfolio performance evaluation, and the situations in which each measure is the most appropriate measure. Question 6: (10 marks) (a) Consider a $1,000 face value 6% coupon bond with 3 years left to maturity that pays semi-annual interest. If the YTM or the market rate is 7%, find the following: Macaulay Duration Modified Duration Approximate Modified/Effective Duration Approximate Convexity (b) If the Modified Duration of a bond is 5.6 and the approximate convexity is 125, what should be the approximate price drop for that bond in percentage for a 50bp increase in YTM? What should be the approximate price increase for that bond in percentage for a 50bp decrease in YTM? marks marks marks marks 4 marks 3 marks 20 marks

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