I need the following solution has to be from Foundations of Finance (7th Edition) (Keown,Martin,Petty) Complete the Mini Case, KMP Ch. 5, p. 154 Complete the Study Problems, KMP pp. 181-182, on expected rate of return, risk, Beta, and the CAPM, problems 6-1, 6-2, 6-3, 6-4, 6-5, 6-6, and 6-7. Complete the Mini Case, KMP Ch. 6, p. 184.

Complete the Mini Case, KMP Ch. 5, p. 154.

Questions

What is the relationship between discounting and compounding?

What is the relationship between the present value factor and the annuity present value factor?

1. What will $5,000 invested for 10 years at a8% compounded annually grow to?

2. How many years will it take $400 to grow to $1,671 if it is invested at 10% compounded annually?

3. At what rate would $1,000 have to be invested to grow to $4,046 in 10 years?

Calculate the future sum of $1,000, given that it will be held in the bank for 5 years and earn 10% compounded semiannually.

What is an annuity due? How does this differ from and ordinary annuity?

What is the present value of an ordinary annuity of $1,000 per year for 7 years discounted back to the present at 10%? What would be the present value if it were an annuity due?

What is the present value of an ordinary annuity of $1,000 per year after 7 years compounded at 10 percent? What would be the future value if it were an annuity due?

You have just borrowed $100,000, and you agree to pay it back over the next 25 years in 25 equal end of year payments plus 10% compound interest on the unpaid balance. What will be the size of these payments?

What is the present value of a $1,000 perpetuity discounted back to the present at 8%?

What is the present value of a $1,000 annuity for 10 years, with the first payment occurring at the end of year 10 (that is, ten $1,000 payments occurring at the end of year 10 through year 19), given a discount rate of 10%?

Given a 10% discount rate, what is the present value of a perpetuity of $1,000 per year if the first payment does not begin until the end of year 10?

Complete the Study Problems, KMP pp. 181-182, on expected rate of return, risk, Beta, and the CAPM, problems 6-1, 6-2, 6-3, 6-4, 6-5, 6-6, and 6-7.

6-1. (Expected rate of return and risk) Carter Inc. is elevating a security. One year Treasury bills are currently paying 9.1%. Calculate the investments expected return and its standard deviation. Should Carter invest in this security?

6-2. (Expected rate of return and risk) Summerville Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return of each?

6-3. (Required rate of return using CAMP)

Compute a fair rate of return for Intel common stock, which has a 1.2 beta. The risk free rate is 6%, and the market portfolio (New York Stock Exchange stocks) has an expected return of 16%.

Why is the rate you computed a fair rate?

6-4. (Estimating beta) From the graph in the margin relating the holding period returns from Aram Inc. to the S&P 500 Index, estimate the firms beta.

6-5. (Capital asset pricing model) Levine Manufacturing Inc. is considering several investments. The rate on Treasury bills is currently 6.75%, and the expected return for the market is 12%. What should be the required rates of return for each investment (using the CAPM)?

6-6. (Capital asset pricing model) MFI Inc. has a beta of 0.86. If the expected market return is 11.5 percent and the risk is free rate is 7.5%, what is the appropriate required return of MFI (using the CAPM)?

Complete the Mini Case, KMP Ch. 6, p. 184.

Use the price data from the table that follows for the Standard & Poors 500 Index, Walmart, and Target to calculate the holding period returns for the 24 months from July 2007 through June 2009.

Calculate the average monthly holding period returns and the standard deviation of these returns for the S&P 500 Index, Walmart, and Target.

Plot (1) the holding period returns for Walmart against the Standard & Poors 500 Index, and (2) the Target holding period returns against the Standard & Poors 500 Index. (Use Figure 6-5 as the format for your graph).

From your graphs in part c, describe the nature of relationship between the stock returns for Walmart and the returns for the S&P 500 index. Make the same comparison for Target.

Assume that you have decided to invest one half of your money in Walmart and the remainder in Target. Calculate the monthly holding period returns for your two stock portfolio. (Hint: The monthly return for the portfolio is the average of the two stocks monthly returns).

Plot the returns of your two stock portfolio against the Standard & Poors 500 Index as you did for the individual stock in part c. How does this graph compare to the graphs for the individual stocks? Explain the difference.

The following table shows the returns on an annualized basis that were realized from holding long term government bonds for the same period. Calculate the average monthly holding period returns and the standard deviations of these returns. (Hint: You will need to convert the annual returns to monthly returns by dividing each return by 12 months).

Now assuming that you have decided to invest equal amounts of money in Walmart, Target, and long term government securities, calculate the monthly returns for your three asset portfolio. What is the average return and the standard deviation?

Make a comparison of the average returns and the standard deviations for all the individual assets and the two portfolios that we designed. What conclusions can be reached by your comparison?

According to Standard & Poors the beta for Walmart and Target are 0.59 and 1.02, respectively. Compare the meaning of these betas relative to the standard deviations calculated above.

Assume that the current treasury bill rate is 4.5 percent and the expected market return is 10%. Given the beta for Walmart and Target in part j, estimate an appropriate rate of return for the two firms.