1. Given the following financial data, compute the return on assets and return o
ID: 2775677 • Letter: 1
Question
1. Given the following financial data, compute the return on assets and return on equity: net income/sales = 8%, sales/total assets = 2.5X, and debt/total assets = 15%.
2. What would be the current yield of a 6% coupon bond priced at $950?
3. A convertible bond has a face value of $1,000 and the conversion price is $35 per share. The stock is selling at $30 per share. The bond pays $75 per year in interest and is selling in the market for $925. It matures in seven years. Market rates are 10% annually. (I) What is the conversion ratio? (II) What is the conversion value?
4. If a $100,000 Treasury bond futures contract changes by 9/32, what is the dollar change
5. A mutual fund is set up to charge a load. Its net asset value is $19.50 and its offer price is $22.00. What is the dollar value of the load (commission)
6. A shopping center has an annual net operating income of $950,000 and a capitalization rate of 6%. What is its value?
7. An investment has the following range of outcomes and probabilities. Outcomes (Percent) Probabilities of Outcomes 6% .25 9% .50 10% .25
Calculate the expected value and the standard deviation (round to two places after the decimal point where necessary).
A. Expected value = 8.50
Standard deviation = 1.50
Refer to Equation 17-1 Ki Pi KiPi 6% .25 1.50 9% .50 4.50 10% .25 2.50 KiPi 8.50
8. Explain the role of a specialist.
9. From the standpoint of fundamental analysis, what types of indicators are most valuable to investors
10. What is a major emphasis of the Dow theory
11. How can an investor earn a higher return in foreign markets than in the United States?
12. Which type of risk is associated with a risk premium
Explanation / Answer
Answer: to the first question-
Return on asset = Net income/Total Asset = (Net income/Sales) * (Sales/Total Asset) = 0.08 * 2.5 = 0.2 = 20%
Return on equity = Net income/Equity = (Net income/ Total Asset) * (Total Asset/Equity)
= (Net income/ Total Asset) * (1 - Debt/Total Asset) = 0.08 * (1-0.15) = 0.08 * 0.85 = 0.068 = 6.8%
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