1) a) b) Assignment must be uploaded to Canvas as a pdf file or MS Word....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
1) a) b) Assignment must be uploaded to Canvas as a pdf file or MS Word. It is ok to scan a hand-written document, but scan to pdf only (no jpeg or camera photo, etc.) Also, scan must be a single file (no multiple documents or files). An analyst estimates the following CAPM Model for ECN Inc. [Enter % as whole number, i.e. 10% is 10]. (RECN-R)=2+1.55(Rm - Rr) Suppose the market premium is expected to be 12% for the next year. If ECN Inc. has a current return of 20% and the risk-free rate is 1%, is this stock over- or under-valued. Assume the estimated model is true. A different analyst believes that macroeconomic factors, particularly monetary policy matters. To capture that she includes the federal funds rate (FFR) in her CAPM-based model. She estimates the following. [Enter % as whole number, i.e. 10% is 10]. (RECN-R)=1.5+1.40(Rm - Ry) - 0.25(FFR) Using the same information from part a) and the fact that the federal funds rate is expected to be 1%, is ECN Inc. over- or under-valued? c) Based on the model estimated in part b) would news that the Federal Reserve is conducting open market purchases like be good or bad for shareholders of ECN Inc? Briefly explain. d) 2) Based on the model estimated b), briefly explain whether you think shares of ECN Inc. would be complements or substitutes for Treasury (US government) bonds. Suppose the following represents daily share price for XYZ Inc. Day Price ($) 1 2.00 2 XYZ Inc. 3 4 5 6 5.00 1.00 6.00 5.00 8.00 Calculate a 2-day moving average of these prices (the first number you have will be for day 2). Calculate a 3-day moving average of these returns (the first number you have will be for day 3). Suppose you wanted to use the 2-day and 3-day moving average for momentum trading. Is there a buy or sell signal on days 3,4, 5, or 6? Briefly explain. c) d) The following are the standard deviations for days 3-6. 1) a) b) Assignment must be uploaded to Canvas as a pdf file or MS Word. It is ok to scan a hand-written document, but scan to pdf only (no jpeg or camera photo, etc.) Also, scan must be a single file (no multiple documents or files). An analyst estimates the following CAPM Model for ECN Inc. [Enter % as whole number, i.e. 10% is 10]. (RECN-R)=2+1.55(Rm - Rr) Suppose the market premium is expected to be 12% for the next year. If ECN Inc. has a current return of 20% and the risk-free rate is 1%, is this stock over- or under-valued. Assume the estimated model is true. A different analyst believes that macroeconomic factors, particularly monetary policy matters. To capture that she includes the federal funds rate (FFR) in her CAPM-based model. She estimates the following. [Enter % as whole number, i.e. 10% is 10]. (RECN-R)=1.5+1.40(Rm - Ry) - 0.25(FFR) Using the same information from part a) and the fact that the federal funds rate is expected to be 1%, is ECN Inc. over- or under-valued? c) Based on the model estimated in part b) would news that the Federal Reserve is conducting open market purchases like be good or bad for shareholders of ECN Inc? Briefly explain. d) 2) Based on the model estimated b), briefly explain whether you think shares of ECN Inc. would be complements or substitutes for Treasury (US government) bonds. Suppose the following represents daily share price for XYZ Inc. Day Price ($) 1 2.00 2 XYZ Inc. 3 4 5 6 5.00 1.00 6.00 5.00 8.00 Calculate a 2-day moving average of these prices (the first number you have will be for day 2). Calculate a 3-day moving average of these returns (the first number you have will be for day 3). Suppose you wanted to use the 2-day and 3-day moving average for momentum trading. Is there a buy or sell signal on days 3,4, 5, or 6? Briefly explain. c) d) The following are the standard deviations for days 3-6.
Expert Answer:
Answer rating: 100% (QA)
Here are the responses to the assignment questions 1a The CAPM model estimated for ECN Inc is RECNR2 ... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
Portray in words what transforms you would have to make to your execution to some degree (a) to accomplish this and remark on the benefits and detriments of this thought.You are approached to compose...
-
answer all questions as instructed below. attend all questions. 4 Computer Vision (a) Explain why such a tiny number of 2D Gabor wavelets as shown in this sequence are so efficient at representing...
-
The economic environment of our country currently does not lend itself to being able to successfully run capital campaigns. In a two page document, research and identify 2 successfully capital...
-
Inventories are valued on a lower of last-in, first-out (LIFO) cost or market basis. At August 31, 2012 and 2011, inventories would have been greater by $1,897 million and $1,587 million,...
-
What are the major ways in which the supply of money can change? If it is that simple, why couldnt the Fed effectively control the money supply in the past?
-
Consider a random walk \(\left\{y_{t} ight\}\) as the partial sum of a white noise process \(\left\{c_{t} ight\}\). a. Show that the \(l\)-step forecast error is...
-
Presented here are an incomplete income statement and balance sheet for Schwenke Corporation. Additional information: 1. The gross profit margin is 40%. 2. The income tax rate is 20%. 3. The...
-
How do individuals cultivate resilience in the face of adversity, drawing upon psychological, social, and neurobiological frameworks? Explain
-
The math club sells candy bars and drinks during football games. 60 candy bars and 110 drinks will sell for $265. 120 candy bars and 90 drinks will sell for $270. How much does each candy bar sell...
-
On March 29, 2017, the European Commission blocked a \( 21\) billion merger between the London Stock Exchange and the Deutsche Brse on the grounds that the deal would create a de facto monopoly in...
-
In May 2017, The Weekend Australian reported that New Zealand's two largest newspaper networks would appeal a decision by the country's Commerce Commission to block them from merging. The newspaper...
-
An Australian company accepts a contract to drill a water well for household use. Its profit will be AU\$3,500 if the well depth necessary to provide an adequate supply of water is 35 meters, but it...
-
If a monopolist produces its product in two factories, it must determine how to allocate production among those locations to minimize its total costs of production and thereby maximize its profits....
-
A company is considering whether or not to purchase a piece of factory equipment for AU\$500,000. The equipment would last three years, is expected to generate AU\$200,000 of additional annual profit...
-
Match each of the following term (a-h) with the correct definition below. a. Credit terms b. FOB destination c. FOB shipping point d. Periodic inventory system e. Perpetual inventory system f....
-
A city maintains a solid waste landfill that was 12 percent filled at the end of Year 1 and 26 percent filled at the end of Year 2. During those periods, the government estimated that total closure...
-
Prove that f(x) = xp is convex on [0, ) for p > 1, and concave on [0, ) for 0 < p < 1.
-
Suppose that f' exists and is integrable on [a ,b]. Prove that f is of bounded variation and If f' is bounded rather than integrable, how do the upper and lower integrals of f' compare to the...
-
Suppose that E is a bounded noncompact subset of Rn and that f: E (0, ). If there is a g: E R such that g(x) > f(x) for all x E, then prove that there exist x1,..., xN E such that E UBgx)
-
When facilitating the methylation or pseudouridylation of an rRNA, a snoRNA functions as a. a decoy. b. a scaffold. c. a guide. d. both b and c.
-
When an ncRNA functions as a decoy, it a. contains binding sites for many different proteins, thereby promoting the formation of a large complex. b. recognizes other ncRNAs and sequesters them,...
-
Suppose that the overexpression of a particular miRNA was associated with pancreatic cancer. Which of the following agents might be effective in treating this type of cancer? a. Enoxacin b. A DNA...
Study smarter with the SolutionInn App