Can you answer these three question on the end?

o [T R CNET LN I 6-9. The Fama-French Three-Factor Model 6-10. Behavioral Finance 6-11. The CAPM and Market Efficiency: Implications... Summary Questions Self-Test Problems L0 Spreadsheet Problem 292 Mini Case Selected Additional Cases Chapter 7. Corporate Valuation and Stock PREVIOUS PAGE Spreadsheet Problem Mini Case Assume that you recently graduated and landed a job as a financial planner with Cicero Services, an investment advisory company. Your first client recently inherited some assets and has asked you to evaluate them. The client owns a bond portfolio with $1 million invested in zero coupon Treasury bonds that mature in 10 years. The client also has $2 million invested in the stock of Blandy, Inc., a company that produces meat-and-potatoes frozen dinners. Blandy's slogan is, \"Solid food for shaky times.\" Unfortunately, Congress and the president are engaged in an acrimonious dispute over the budget and the debt ceiling. The outcome of the dispute, which will not be resolved until the end of the year, will have a big impact on interest rates one year from now. Your first task is to determine the risk of the client's bond portfolio. After consulting with the economists at your firm, you have specified five possible scenarios for the resolution of the dispute at the end of the year. For each scenario, you have estimated the probability of the scenario occurring and the impact on interest rates and bond prices if the scenario occurs. Given this information, you have calculated the rate of return on 10-year zero coupon Treasury bonds for each scenario. The probabilities and returns are shown here: Returnon a 10-Year Zero Probability of Coupon Treasury Bond Scenario Scenario During the Next Year Worst Case 0.10 -14% NEXT PAGE Selected Additional Cases anagement eTextbook: Return on a 10-Year Zero Financial Probability of Coupon Treasury Bond Management: Scenario Scenario During the Next Year Theory and Practice Worst Case 0.10 -14% Poor Case 0.20 -4% 6% E 6-9. The Fama-French Most Likely 0.40 278 Three-Factor Model Good Case 0.20 16% Best Case 0.10 26% 6-10. Behavioral 282 1.00 Finance 6-11. The CAPM and Market Efficiency: 285 You have also gathered historical returns for the past 10 years for Blandy and Gourmange Implications... Corporation (a producer of gourmet specialty foods), and the stock market. Summary 286 Questions 287 Historical Stock Returns Self-Test Problems 288 Year Market Blandy Gourmange Problems 289 Spreadsheet Problem 291 30% 26% 47% Mini Case 292 Selected Additional Cases 2 7 15 -54 Chapter 7. Corporate Valuation and Stock 295 Jump to Page 292 GO PREVIOUS PAGE NEXT PAGE Spreadsheet Problem Selected Additional CaseseTextbook: Financial Management: Historical Stock Returns Theory and Practice 6-9. The Fama-French Year Market Blandy Gourmange Three-Factor Model 278 6-10. Behavioral 282 Finance 30% 26% 47% 6-11. The CAPM and Market Efficiency: 285 Implications... N 7 15 -54 Summary 286 Questions 287 18 -14 15 Self-Test Problems 288 Problems 289 4 -22 -15 7 Spreadsheet Problem 291 Mini Case 292 -14 2 -28 Selected Additional Cases Chapter 7. Corporate 6 10 -18 40 Valuation and Stock 295eTextbook: Financial 7 26 42 17 Management: Theory and Practice 8 -10 30 6-9. The Fama-French -23 278 Three-Factor Model 6-10. Behavioral 282 Finance 9 -3 -32 -4 6-11. The CAPM and Market Efficiency: 285 Implications... 10 38 28 75 Summary 286 Questions 287 Average return: 8.0% 9.2% Self-Test Problems 288 Problems 289 Standard 20.1% ? 38.6% deviation: Spreadsheet Problem 291 Mini Case 292 Correlation with 1.00 ? 0.678 Selected Additional Cases the market: Chapter 7. Corporate Valuation and Stock 295ment= eTextbook: Financial Standard 20.1% ? 38.6% Management: deviation: Theory and Practice 6-9. The Fama-French 278 Three-Factor Model Correlation with 1.00 0.678 the market: 6-10. Behavioral 282 Finance 6-11. The CAPM and Beta: 1.00 ? 1.30 Market Efficiency: 285 Implications... Summary 286 The risk-free rate is 4%, and the market risk premium is 5%. Questions 287294 Jordan Jones (J]) and Casey Carter (CC) are portfolio managers at your firm. Each manages a well-diversified portfolio. Your boss has asked for your opinion regarding their performance in the past year. JJ's portfolio has a beta of 0.6 and had a return of 8.5%; CC's portfolio has a beta of 1.4 and had a return of 9.5%. Which manager had better performance? Why? What does market equilibrium mean? If equilibrium does not exist, how will it be established? What is the Efficient Markets Hypothesis (EMH), and what are its three forms? What evidence supports the EMH? What evidence casts doubt on the EMH