Homework answers / question archive / 1

1

Finance

Share With

1. you forecast that the standard deviation of the market return will be 20% in the coming year. If the measure of risk aversion in Er- A = σ? is A = 4: a. What would be a reasonable guess for the expected market risk premium? Market Risk Premium % b. What value of A is consistent with a risk premium of 9%? (Round your answer to 2 decimal places.) Consistent value of A
c. What will happen to the risk premium if investors become more risk tolerant? Increased risk tolerance means decreased risk aversion (A), which results in an) in risk premiums.

2. The data on a loan has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.

a. Complete an amortization schedule for a $39,000 loan to be repaid in equal installments at the end of each of the next three years. The interest rate is 11% compounded annually. Round all answers to the nearest cent.

Beginning Repayment Ending YearBalance PaymentInterestof PrincipalBalance

1 $ $    $   $    $ $

2 $ $ $ $ $ $

3 $ $ $   $ $ $

% Interest % Principal

year 1 % %

Year2 % %

Year 3:% %

3.What are the investment criteria applied by foreign investors in GCC markets