# US And Brazilian Finance Assingment Help With Solution

## US And Brazilian Finance Assingment Help With Solution

1. Consider portfolios with positions in the US and Brazilian equity markets. The (annual) expected
return and standard deviation of returns (in US dollars) for the 2 markets are as follows:
US Brazil
E[r] 10% 15%
SD[r] 20% 30%
The correlation between the returns is 0.2. In addition, assume that the (annual) risk-free (T-bill)
rate is 5%.

a. Calculate the expected returns and standard deviations of the following portfolios:
(i) 50% in the risk-free asset, 50% in the US
(ii) 50% in the risk-free asset, 50% in Brazil
(iii) 50% in the US, 50% in Brazil (Note: You already did this calculation for PS#1.)
(iv) 50% in the risk-free asset, 50% in the portfolio in (iii) above

b. Calculate the Sharpe ratios of
(i) the US market
(ii) the Brazilian market
(iii) the portfolio in Q.1a(iii)
(iv) the portfolio in Q.1a(iv)

c. Find the weights (T-bill, US, Brazil) for a portfolio with the same expected return as
Brazil (15%), using only a combination of the risk-free rate and the portfolio in Q.1a(iii)?
What is the standard deviation of this portfolio? What is the correlation of this portfolio
with the portfolio in Q.1a(iii)?

2. Assume the risk-free rate is 5% (rf = 5%), the expected return on the market portfolio is 10%
(E[rM] = 10%) and the standard deviation of the return on the market portfolio is 20% (σM =
20%). (All numbers are annual.) Assume the CAPM holds.

a. What are the expected returns on securities with the following betas:
(i) β = 1.4
(ii) β = 0.6
(iii) β = -0.2

b. What are the betas of securities with the following expect returns:
(i) 10%
(ii) 5%
(iii) -1%

c. What are the portfolio weights (in the risk-free asset and the market portfolio) for
efficient portfolios (portfolios on the efficient frontier/CML) with expected returns of
(i) 6%
(ii) 10%
(iii) 20%

d. What are the portfolio weights (in the risk-free asset and the market portfolio) for
efficient portfolios (portfolios on the efficient frontier/CML) with standard deviations of
(i) 8%
(ii) 20%
(iii) 25%

e. Can securities or portfolios with the following characteristics exist in equilibrium,
assuming the CAPM holds (yes or no):
(i) expected return 0%, standard deviation 40%
(ii) expected return 8%, standard deviation 9%
(iii) expected return 15%, standard deviation 50%

f. A stock with a beta of 1 (β = 1.0) has a current price of \$40/share.
(i) Assuming it pays no dividends, what is the expected price in 1 year?
(ii) If it is expected to pay a dividend of \$4/share at the end of the year, what is the
expected price in 1 year (after the payment of the dividend)?

g. For a moment (but just a moment) assume that the CAPM may not hold. A non-dividend
paying stock has a current price of \$50/share and an expected price in 1 year of
\$57/share (based on your personal analysis of the company’s prospects).
(i) If the stock has a beta of 1 (β = 1.0), what is its alpha (α)?
(ii) What is the alpha (α) if the beta is 2 (β = 2.0)?

## How it Works

#### How It works ?

Step 1:- Click on Submit your Assignment here or shown in left side corner of every page and fill the quotation form with all the details. In the comment section, please mention product code mentioned in end of every Q&A Page. You can also send us your details through our email id support@assignmentconsultancy.com with product code in the email body. Product code is essential to locate your questions so please mentioned that in your email or submit your quotes form comment section.

Step 3:- Once we received your assignments through submit your quotes form or email, we will review the Questions and notify our price through our email id. Kindly ensure that our email id assignmentconsultancy.help@gmail.com and support@assignmentconcultancy.com must not go into your spam folders. We request you to provide your expected budget as it will help us in negotiating with our experts.

Step 4:- Once you agreed with our price, kindly pay by clicking on Pay Now and please ensure that while entering your credit card details for making payment, it must be done correctly and address should be your credit card billing address. You can also request for invoice to our live chat representatives.

Step 5:- Once we received the payment we will notify through our email and will deliver the Q&A solution through mail as per agreed upon deadline.

Step 6:-You can also call us in our phone no. as given in the top of the home page or chat with our customer service representatives by clicking on chat now given in the bottom right corner.

## Features

#### Features for Assignment Help

Zero Plagiarism
We believe in providing no plagiarism work to the students. All are our works are unique and we provide Free Plagiarism report too on requests.

Relevancy
We believe in providing perfect, relevant and 100% accurate solutions to the student as per questions asked. All our experts are perfect in providing that so as to give unique experience to the students.

Three Stage Quality Check
We are the only service providers boasting of providing original, relevant and accurate solutions. Our three stage quality process help students to get perfect solutions.

100% Confidential
All our works are kept as confidential as we respect the integrity and privacy of our clients.

## Related Services

3. XYZ Inc. has expected earnings over the next year of \$2/share (E[E1] = 2). The company is
expected to maintain an earnings retention rate of 40% (b = 0.4), i.e., 60% of earnings are
expected to be paid out as dividends every year. The company has a beta of 2, the risk-free rate
is 4% (rf = 4%), and the market risk premium is also 4% (E[rM]-rf = 4%).

a. If the growth rate in earnings is expected to be 4% in perpetuity
i. What is the value of the stock?
ii. What is the expected price a year from now?
iii. What is the expected holding period return over the next year?
iv. What ROE justifies (is consistent with) this growth rate?

b. If the ROE is expected to be 15% in perpetuity
i. What is the implied growth rate?
ii. What is the value of the stock?

c. If the current price of the stock is \$18/share
i. What is the implied growth rate?
ii. What is the implied ROE?

4. XYZ Inc. is expected to pay no dividends for the next 5 years. However, at the end of the sixth
year (at time 6), the company is expected to pay a dividend of \$1/share. Dividends are expected
to grow at 10% per year for the following 9 years (through the end of the 15th year, i.e., time 15),
then to grow at 5% every year thereafter (forever). Assume the appropriate discount rate
(required return) is 10%.
a. What is the expected value of the stock at time 15?
b. What is the expected value of the stock at time 5?
c. What is the value of the stock today?

5. Consider a 2-year, risk-free bond with a coupon rate of 6% (annual coupons) and a face amount
of \$1,000. If the yield on the bond is 6% (i.e., P = \$1,000),

a. What is the Macaulay duration of this bond?

b. If the yield increases to 7% immediately, what does the duration approximation predict
will be the percentage change in the bond price?

c. If the yield increases to 7% immediately, what is the actual percentage change in the
bond price?

### Product Code :Fin288

To get answer for this question, kindly click here (Note: Don’t forget to write the product code in comment section)

You can also email us at assignmentconsultancy.help@gmail.com but please mentioned product code in the mail body while sending emails.You can browse more questions to get answer in our Q&A sections here.

Summary
User Rating