PLEASE ANSWER ALL QUESTIONS WITH FULL AND PROPER ANSWERS (PEOPLE SOMETIMES ANSWER HALF AND ANSWER UNPROPERLY. THANK YOU ALL FOR YOUR ATTRIBUTION)

Q1 Next year economy can be good, normal or bad. Assuming next years economic state will occur based on Republic of Turkeys quarterly economic growth rates at past.

Good= ( number of times 5.5 % < growth ) / number of quarters

Normal= ( number of times 0 < growth < 5.5 % ) / number of quarters

Bad= ( number of times growth < 0 ) / number of quarters

Number of quarters will be deducted for the period from July 2015 to July 2018

Ex: from July 2016 to July 2017 with quarter performances -1, 3, 4 , 7 % -> good = bad = , normal =

Compute the E(return) for the stock of Corporation1 whose data of expected return of the stocks for next year is given below:

	Bad		Normal		Good
	E(return)	probability	E(return)	probability	E(return)	probability
	-0.50	0.2	-0.30	0.2	-0.10	0.2
	-0.40	0.1	-0.20	0.1	0.00	0.1
	-0.30	0.1	0.00	0.1	0.10	0.1
	0.00	0.3	0.10	0.3	0.20	0.3
	0.10	0.1	0.20	0.1	0.30	0.1
	0.20	0.2	0.30	0.2	0.40	0.2

Q2 You are considering two assets with the following characteristics:

E(R1) = 0,15 E(1) = 0,10 w1 = 0,5

E(R2) = 0,20 E(2) = 0,20 w2 = 0,5

a. Answer below

i. Define correlation coefficient

ii. Define risk averse, risk neutral, gambler behaviors

iii. Define the characteristic of an investor who tries to invest with a portfolio

b. Compute the mean and standard deviation of two portfolios if r1,2 = + 0,30 and - 0,40, respectively.

c. Plot the two portfolios on a risk-return graph and briefly explain the results.

Q3 You are considering two assets with the following characteristics:

E(R1) = 0,15 E(1) = 0,10

E(R2) = 0,20 E(2) = 0,20

Take the correlation between the assets as 0.

Use below options

i. w1 = 0,2 ; w2 = 0.8

ii. w1 = 0,4 ; w2 = 0.6

iii. w1 = 0,6 ; w2 = 0.4

iv. w1 = 0,8 ; w2 = 0.2

a. Without calculation tell which option is the most preferable for return and why

b. Calculate the risk and return of the portfolios. Which is the most preferable from the risk point

c. In this option a mix method for choosing between portfolios will be created. Max (best) return will be rewarded with 100 points. Max (worst) risk will be penalized with minus 100 points

Example for part c is below. You are expected to solve in the same way

ReturnRiskPOINTSPENALTIESTOTAL POINTS

A0.10.05100-1000

B0.090.0390-6030

C0.050.0250-4010

D0.040.0140-2020

B is the choice

Q4 - The Company4 Pets & BestFriends has consistently paid out 50% of its earnings in dividends. The company's return to equity is 20%.

a. What would you estimate as its dividend growth rate?

b. Shortly but adequately describe and explain equity, return on equity, leverage, dividend growth rate

c. Give leverage examples in banking, forex, a company uses credit, government

d. Given the low risk in dog food, your required rate of return on the Company4 is 15%. What P/E ratio would you apply to the firm's earnings?

Q5 You expect a RFR of 10% and the market return (RM) of 16%.

	Stock	Beta
	U	0.85
	N	1.25
	D	0.20

a. Compute the expected return for the following stocks and plot them on an SML graph.

b. You ask a stockbroker what the firm's research department expects for these three stocks. The broker responds with the following information:

	Stock	Current Price	Expected Price	Expected Dividend
	U	22	24	0.80
	N	46	50	2.00
	D	36	40	1.50

Plot your estimated returns on the graph from Part a and indicate what actions you would take regarding these stocks. Explain your decisions.

Q6 The following are the historic percentage returns for Company6 Technologies:

	Year	Company6 Tech.(%)	General Index (%)
	1	38	15
	2	8	13
	3	-12	14
	4	7	-9
	5	12	12
	6	5	9

Based on this information, compute the following:

a. The correlation coefficient between Computer6 Tech and the General Index.

b. The standard deviation for the company and the index.

c. The beta for Computer6 Tech.

Q7 - What is the value to you of a 8% coupon bond with a par value of $10.000 that matures in 2 years if you require a

a. 6% annual return?

b. 10% annual return?

Use quarter-annual compounding.

Q8 Which of the following statement(s) is(are) true regarding the selection of a portfolio from those that lie on the capital allocation line?

I) Less risk-averse investors will invest more in the risk-free security and less in the optimal risky portfolio than more risk-averse investors.

II) More risk-averse investors will invest less in the optimal risky portfolio and more in the risk-free security than less risk-averse investors.

III) Investors choose the portfolio that maximizes their expected utility.

a. Shortly support or refute the above statements one by onewith your own words

b. When is there an opportunity to buy?

a. The assets location in E vs. Std.dev is above capital allocation line

b. The assets location in E vs. Std.dev is below capital allocation line

Explain why

c. Describe effficient market hyphothesis. In a transparent market where everyone does logical decisions do we expect assets far from capital allocation line in long term? Explain why

QBonus Do below

a. Describe and explain EBIT, EBITDA

b. Write what each letter stands for in EBITDA