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BUS
405 WEEK 1 DQ 1 BLUMES FORMULA, ALLOCATION, AND SELECTION
Blume’s Formula, Allocation, and Selection. From Chapter 1, answer Concept Question 5: What is Blume’s formula?
When would you want to use it in practice? Also, from Chapter 2, answer Concept
Question 4: What is the difference between asset allocation and security
selection? Remember to complete all parts of the questions and support your
answers with examples from the text and other resources. Respond to at least
two of your classmates’ postings outside of your own thread.
BUS 405 WEEK 1 DQ 2 MONEY MARKET FUNDS
Money Market Funds. From Chapter 4,
complete Problem 4: The Aqua Liquid Assets Money Market Mutual Fund has a NAV
of $1 per share. During the year, the assets held by this fund appreciated by
2.5 percent. If you had invested $50,000 in this fund at the start of the year,
how many shares would you own at the end of the year? What will the NAV of this
fund be at the end of the year? Why? Remember to complete all parts of the
question, show your work, and report the results of your analysis. Respond to
at least two of your classmates’ postings outside of your own thread.
BUS 405 WEEK 1 QUIZ CHAPTERS 14
BUS 405 Week 1 Quiz
Chapters 14
BUS 405 WEEK 1 ASSIGNMENT ANNUALIZED RETURNS CHAPTER
3 PROBLEM 18
Annualized Returns.
Complete problem 18 in Chapter 3 (shown below) and submit to the instructor.
Show your work to find the annualized return for each of the listed share
prices. Write a 100 word analysis of the process to calculate these annualized
returns.
Suppose you have $28,000 to invest.
You’re considering MillerMoore Equine Enterprises (MMEE), which is currently
selling for $40 per share. You also notice that a call option with a $40 strike
price and six months to maturity is available. The premium is $4.00. MMEE pays
no dividends. What is your annualized return from these two investments if, in
six months, MMEE is selling for $48 per share? What about $36 per share?
BUS 405 WEEK 2 DQ 1 PRIMARY AND SECONDARY MARKETS
Primary and Secondary
Markets. Complete Concept Question
1 from Chapter 5: If you were to visit your local Chevrolet retailer, there is
both a primary and a secondary market in action. Explain. Is the Chevy retailer
a dealer or a broker? Remember to complete all parts of the question and
support your answers with examples from the text and other resources. Respond
to at least two of your classmates’ postings outside of your own thread.
BUS 405 WEEK 2 DQ 2 CONTRARIAN INVESTING
Contrarian Investing. Complete Concept
Question 9 from Chapter 8: What does it mean to be a contrarian investor? How
would a contrarian investor use technical analysis? Post your answers to the
discussion board. Remember to complete all parts of the question and support
your answers with examples from the text and other resources. Respond to at
least two of your classmates’ postings outside of your own thread.
BUS 405 WEEK 2 ASSIGNMENT ABBOTT LABORATORIES PROBLEM
Abbott Laboratories
Problem. After reading the Value Line figures and information on
Abbott Laboratories in the Questions and Problems section of Chapter 6 (just
before Problem 27), complete Problems 27, 28, 29, 30, and 31 and submit to your
instructor. Show your calculations and in your response to problem 31 write a
100 to 200 word defense of your position as to the value of Abbott Laboratories
stock at its current price of $50 per share.
27. What is the sustainable growth
rate and required return for Abbott Laboratories? Using these values, calculate
the 2010 share price of Abbott Laboratories Industries stock according to the
constant dividend growth model.
28. Using the P/E, P/CF, and P/S
ratios, estimate the 2010 share price for Abbott Laboratories. Use the average
stock price each year to calculate the price ratios.
29. Assume the sustainable growth
rate and required return you calculated in Problem 27 are valid. Use the clean
surplus relationship to calculate the share price for Abbott Laboratories with
the residual income model.
30. Use the information from the
previous problem and calculate the stock price with the clean surplus dividend.
Do you get the same stock price as in the previous problem? Why or why not?
31. Given your answers in the
previous questions, do you feel Abbott Laboratories is overvalued or
undervalued at its current price of around $50? At what price do you feel the
stock should sell?
BUS 405 WEEK 2 QUIZ CHAPTERS 58
BUS 405 Week 2 Quiz
Chapters 58
BUS 405 WEEK 3 DQ 1 FORWARD INTEREST RATES
Forward Interest Rates. Complete Problem 16
from the Questions and Problems section of Chapter 9: According to the pure
expectations theory of interest rates, how much do you expect to pay for a
oneyear STRIPS on February 15, 2011? What is the corresponding implied forward
rate? How does your answer compare to the current yield on a oneyear STRIPS?
What does this tell you about the relationship between implied forward rates,
the shape of the zero coupon yield curve, and market expectations about future
spot interest rates? Remember to complete all parts of the questions, and
report the results of your analysis. Respond to at least two of your
classmates’ postings outside of your own thread.
BUS 405 WEEK 3 DQ 2 BOND PRICES VERSUS YIELDS
Bond Prices versus Yields. Complete Concept
Question 9 of Chapter 10: (a) What is the relationship between the price of a
bond and its YTM? (b) Explain why some bonds sell at a premium to par value,
and other bonds sell at a discount. What do you know about the relationship
between the coupon rate and the YTM for premium bonds? What about discount
bonds? For bonds selling at par value? (c) What is the relationship between the
current yield and YTM for premium bonds? For discount bonds?For bonds selling
at par value? Remember to complete all parts of the questions, and report the
results of your analysis. Respond to at least two of your classmates’ postings
outside of your own thread.
BUS 405 WEEK 3 ASSIGNMENT BOOTSTRAPPING CHAPTER 10
PROBLEM 31
Bootstrapping. Complete problem 31 of Chapter 10 (shown below), and submit to your
instructor. Show your calculations and the algebraic manipulation of the price
equation for the bond. In addition to solving the problem, write a 100 to 200
word essay on the term structure of fixed income securities.
One method used to
obtain an estimate of the term structure of interest rates is called
bootstrapping. Suppose you have a oneyear zero coupon bond with a rate of r1
and a twoyear bond with an annual coupon payment of C. To bootstrap the twoyear
rate, you can set up the following equation for the price (P) of the
coupon bond:
Because you can observe
all of the variables except r2,
the spot rate for two years, you can solve for this interest rate. Suppose
there is a zero coupon bond with one year to maturity that sells for $949 and a
twoyear bond with a 7.5 percent coupon paid annually that sells for $1,020.
What is the interest rate for two years? Suppose a bond with three years until
maturity and an 8.5 percent annual coupon sells for $1,029. What is the
interest rate for three years?
BUS 405 WEEK 3 QUIZ CHAPTERS 910
BUS 405 Week 3 Quiz
Chapters 910
BUS 405 WEEK 4 DQ 1 EXPECTED RETURNS AND DEVIATION
Expected Returns and Deviation. Complete Problems 1, 2, and 3 from the
Questions and Problems section of Chapter 11 (shown below). Remember to
complete all parts of the questions, and report the results of your analysis.
Respond to at least two of your classmates’ postings outside of your own
thread.
a. Use the following information on states
of the economy and stock returns to calculate the expected return for Dingaling
Telephone.
State of Economy

Probability of State of the Economy

Security Return if State Occurs

Recession

.30

8%

Normal

.40

13

Boom

.30

23

BUS 405 WEEK 4 DQ 2 PORTFOLIO WEIGHTS
Portfolio Weights. Complete Problem 10 from the Questions and Problems section of Chapter
12: A stock has a beta of .9 and an expected return of 9 percent. A riskfree
asset currently earns 4 percent.
a. What is the expected return on a
portfolio that is equally invested in the two assets?
b. If a portfolio of the two assets
has a beta of .5, what are the portfolio weights?
c. If a portfolio of the two assets
has an expected return of 8 percent, what is its beta?
d. If a portfolio of the two assets
has a beta of 1.80, what are the portfolio weights? How do you interpret the
weights for the two assets in this case? Explain.
Remember to complete all parts of
the questions, and report the results of your analysis. Respond to at least two
of your classmates’ postings outside of your own thread.
BUS 405 WEEK 4 ASSIGNMENT PERFORMANCE METRICS CHAPTER
13 PROBLEM 22
Performance Metrics. Complete Problem 22 in the Questions and
Problems section of Chapter 13 (shown below). When you pick the best choice for
your portfolio, defend your decision in a 100  200 word essay.
You have been given the following return information
for two mutual funds (Papa and Mama), the market index, and the riskfree
rate. Year

Papa Fund

Mama Fund

Market

RiskFree

2008

12.6%

22.6

24.5%

1%

2009

25.4

18.5

19.5

3

2010

8.5

9.2

9.4

2

2011

15.5

8.5

7.6

4

2012

2.6

1.2

2.2

2

BUS 405 WEEK 4 QUIZ CHAPTERS 1113
BUS
405 Week 4 Quiz Chapters 1113
BUS 405 WEEK 5 DQ 1 HEDGING WITH FUTURES
Hedging with Futures. Complete Concept
Question 7 from Chapter 14: The town of South Park is planning a bond issue in
six months and Kenny, the town treasurer, is worried that interest rates may
rise, thereby reducing the value of the bond issue. Should Kenny buy or sell
Treasury bond futures contracts to hedge the impending bond issue? Remember to
complete all parts of the question and support your answers with examples from
the text and other resources. Respond to at least two of your classmates’
postings outside of your own thread.
BUS 405 WEEK 5 DQ 2 OPTION STRATEGIES
Option Strategies. Complete Concept
Question 12 from Chapter 15: Recall the options strategies of a protective put
and covered call discussed in the text. Suppose you have sold short some shares
of stock. Discuss analogous option strategies and how you would implement them.
(Hint: They’re
called protective calls and covered puts.) Remember to complete all parts of
the question and support your answers with examples from the text and other
resources. Respond to at least two of your classmates’ postings outside of your
own thread.
BUS 405 WEEK 5 FINAL PROJECT CONSTRUCT A
WELLDIVERSIFIED PORTFOLIO
Focus of the Final
Project
The student will construct a
welldiversified portfolio using an initial investment stake of $50,000 (the
portfolio should use 95% of the fund, but they may not use more than $50,000).
The student may include stocks, common or preferred; bonds, corporate or U.S. Treasury
bonds; mutual funds; and futures contract or options. The student will use the
closing prices from the first day of the class to determine the price of each
issue. Only whole lots of any issues may be acquired, that is no less than 100
shares of common or preferred stock; no less than 5 corporate bonds or $10,000
for U.S. Treasury Bonds; no fewer than the minimum required investment for any
mutual fund; and no fewer than 5 contracts for any option or futures position.
The settlement date will be the first day of Week 3. The student does not have
to use all of the above mentioned securities, but they must use more than one
class. Transaction costs are ignored in the creation of the portfolio.
The paper is to be written in
accordance with the APA guidelines (6th Edition).
The student will write a paper
that:
Produces their investment strategy,
including an assessment of their willingness to bear risk.
Summarizes and executes a detailed
description of the securities in the portfolio including brief historical
information about each firm.
Executes a quarterly and annualized
return on the portfolio, and the expected return for the portfolio (the student
may use the closing prices as of 31 December of last year).
Using concepts learned within the
course, computes the beta of the portfolio (MERGENT, in the Ashford Online
Library, can be used to find the historical betas of each security).
Summarizes the risks of their
portfolio, and recognizes and interprets any areas where they might consider
reinvesting portions of their portfolio to achieve either less risk or higher
expected return.
BUS 405 ENTIRE COURSE
BUS 405 Week 1 DQ 1 Blumes Formula, Allocation, and
Selection
BUS 405 Week 1 DQ 2 Money Market Funds
BUS 405 Week 1 Quiz Chapters 14
BUS 405 Week 1 Assignment Annualized Returns Chapter 3
problem 18
BUS 405 Week 2 DQ 1 Primary and Secondary Markets
BUS 405 Week 2 DQ 2 Contrarian Investing
BUS 405 Week 2 Assignment Abbott Laboratories Problem
BUS 405 Week 2 Quiz Chapters 58
BUS 405 Week 3 DQ 1 Forward Interest Rates
BUS 405 Week 3 DQ 2 Bond Prices versus Yields
BUS 405 Week 3 Assignment Bootstrapping Chapter 10 Problem
31
BUS 405 Week 3 Quiz Chapters 910
BUS 405 Week 4 DQ 1 Expected Returns and Deviation
BUS 405 Week 4 DQ 2 Portfolio Weights
BUS 405 Week 4 Assignment Performance Metrics Chapter 13
Problem 22
BUS 405 Week 4 Quiz Chapters 1113
BUS 405 Week 5 DQ 1 Hedging with Futures
BUS 405 Week 5 DQ 2 Option Strategies
BUS 405 Week 5 Final Project Construct a welldiversified
portfolio
BUS
405 Complete Course BUS405 Complete Course
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