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FIN 402 MASTER Minds Online/fin402master.com - Flashcards

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Class:MARK 3324 - BUYER BEHAVIOR
Subject:Marketing
University:University of Texas - Arlington
Term:Fall 2014
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FIN 402 Week 1 Assignment Case Problem 1.2 Preparing Carolyn Bowen’s Investment Plan

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Case Problem 1.2 Preparing Carolyn Bowen’s Investment Plan Carolyn Bowen, who just turned 55, is employed as an administrative assistant for the Xcon Corporation, where she has worked for the past 20 years. She is in good health, lives alone, and has two grown children. A few months ago her husband died, leaving her with only their home and the proceeds from a $75,000 life insurance policy. After she paid medical and funeral expenses, $60,000 of the life insurance proceeds remained. In addition to the life insurance proceeds, Carolyn has $37,500 in a savings account, which she had accumulated over the past 10 years. Recognizing that she is within 10 years of retirement, Carolyn wishes to invest her limited resources 
FIN 402 Week 1 Assignment Case Problem 1.2, 2.1, 2.2, 3.1, 12.1

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FIN 402 Week 1 Assignment Case Problem 1.2 Preparing Carolyn Bowen’s Investment Plan FIN 402 Week 1 Assignment Case Problem 2.1 Dara’s Dilemma: What to Buy? FIN 402 Week 1 Assignment Case Problem 2.2 Ravi Dumar’s High-Flying Margin Account FIN 402 Week 1 Assignment Case Problem 3.1 The Perezes’ Good Fortune FIN 402 Week 1 Assignment Case Problem 12.1 Reverend Mark Thomas Ponders Mutual Funds

FIN 402 Week 1 Assignment Case Problem 2.2 Ravi Dumar’s High-Flying Margin Account

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Case Problem 2.2 Ravi Dumar’s High-Flying Margin Account Ravi Dumar is a stockbroker who lives with his wife, Sasha, and their five children in Milwaukee, Wisconsin. Ravi firmly believes that the only way to make money in the market is to follow an aggressive investment posture—for example, to use margin trading. In fact, Ravi has built himself a substantial margin account over the years. He currently holds $75,000 worth of stock in his margin account, though the debit balance in the account amounts to only $30,000. Recently Ravi uncovered a stock that, on the basis of extensive analysis, he feels is about to take off. 
FIN 402 Week 1 Assignment Case Problem 3.1 The Perezes’ Good Fortune

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Case Problem 3.1 The Perezes’ Good Fortune Angel and Marie Perez own a small pool hall located in southern New Jersey. They enjoy running the business, which they have owned for nearly three years. Angel, a retired professional pool shooter, saved for nearly 10 years to buy this business, which he and his wife own free and clear. The income from the pool hall is adequate to allow Angel, Marie, and their children, Mary (age 10) and José (age 4), to live comfortably. Although he lacks formal education beyond the 10th grade, Angel has become an avid reader. He enjoys reading about current events and personal finance, particularly investing. He especially likes Money magazine, from which he has gained numerous ideas for better managing the family’s finances. Because of the long hours required to run the business, Angel can devote 3 to 4 hours a day (on the job) to reading. Recently Angel and Marie were notified that Marie’s uncle had died and left them a portfolio of stocks and bonds with a current market value of $300,000. They were elated to learn of their good fortune but decided it would be best not to change their lifestyle as a result of this inheritance. Instead, they want their newfound wealth to provide for their children’s college educations as well as their own retirement. 
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FIN 402 Week 1 AssignmentCase Problem 2.1Dara’s Dilemma: What to Buy?

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Case Problem 2.1Dara’s Dilemma: What to Buy? Dara Simmons, a 40-year-old financial analyst and divorced mother of two teenage children, considers herself a savvy investor. She has increased her investment portfolio considerably over the past five years. Although she has been fairly conservative with her investments, she now feels more confident in her investment knowledge and would like to branch out into some new areas that could bring higher returns. She has between $20,000 and $25,000 to invest. Attracted to the hot market for technology stocks, Dara was interested in purchasing a tech IPO stock and identified NewestHighTech.com, a company that makes sophisticated computer chips for wireless Internet connections, as a likely prospect. The 1-year-old company had received some favorable press when it got early-stage financing and again when its chip was accepted by a major cell phone manufacturer. Dara also was considering an investment in 400 shares of Casinos International common stock, currently selling for $54 per share.
FIN 402 Week 1 Individual Problem Set

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The Problem Set is provided to you to enable you to practice the concepts outlined in the textbook. Select THREE completed problems from the assignment and post your solutions to those problems.

1. Creating prices for securities and allowing for liquidity are functions of

2. Which of the following best describes the function of an investment banker selling an issue on a "best efforts" basis?

3. From the investment banker's point of view, the major reason syndicates are formed in the distribution of large issues is for the purpose of

4.  ___________ has two major functions: to handle special orders, such as purchases with a price contingency; and to maintain continuous, liquid, orderly markets

FIN 402 Week 1 Individual Weekly Question

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Submit your Weekly Questions, with original questions, in a Microsoft Word or text file. Be sure to show your work to earn full credit.

 

Do not use Investopedia, About.com, Wikipedia, or other generic internet websites as sources. Use credible sources only.

Also, do not use quotes in lieu of a response in your own words.

FIN 402 Week 2 Assignment Case Problem 2.1 Traditional Versus Modern Portfolio Theory Who’s Right

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Case Problem 2.1 Traditional Versus Modern Portfolio Theory: Who’s Right? Walt Davies and Shane O’Brien are district managers for Lee, Inc. Over the years, as they moved through the firm’s sales organization, they became (and still remain) close friends. Walt, who is 33 years old, currently lives in Princeton, New Jersey. Shane, who is 35, lives in Houston, Texas. Recently, at the national sales meeting, they were discussing various company matters, as well as bringing each other up to date on their families, when the subject of investments came up. Each had always been fascinated by the stock market, and now that they had achieved some degree of financial success, they had begun actively investing. As they discussed their investments, Walt said he thought the only way an individual who does not have hundreds of thousands of dollars can invest safely is to buy mutual fund shares. He emphasized that to be safe, a person needs to hold a broadly diversified portfolio and that only those with a lot of money and time can achieve independently the diversification that can be readily obtained by purchasing mutual fund shares. 
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FIN 402 Week 2 Assignment Case Problem 4.1 Coates’s Decision

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Case Problem 4.1 Coates’s Decision On January 1, 2017, Dave Coates, a 23-year-old mathematics teacher at Xavier High School, received a tax refund of $1,100. Because Dave didn’t need this money for his current living expenses, he decided to make a long-term investment. After surveying a number of alternative investments costing no more than $1,100, Dave isolated two that seemed most suitable to his needs. Each of the investments cost $1,050 and was expected to provide income over a 10-year period. Investment A provided a relatively certain stream of income. Dave was a little less certain of the income provided by investment B. From his search for suitable alternatives, Dave found that the appropriate discount rate for a relatively certain investment was 4%. Because he felt a bit uncomfortable with an investment like B, he estimated that such an investment would have to provide a return at least 4% higher than investment A. Although Dave planned to reinvest funds returned from the investments in other vehicles providing similar returns, he wished to keep the extra $50 ($1,100 − $1,050) invested for the full 10 years in a savings account paying 3% interest compounded annually. As he makes his investment decision, Dave has asked for your help in answering the questions that follow the 
FIN 402 Week 2 Assignment Case Problem 4.1, 4.2, 2.1, 5.2, 13.1 (Part a,b,c,d)

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FIN 402 Week 2 Assignment Case Problem 4.1 Coates’s Decision FIN 402 Week 2 Assignment Case Problem 4.2 The Risk-Return Tradeoff Molly O’Rourke’s Stock Purchase Decision FIN 402 Week 2 Assignment Case Problem 2.1 Traditional Versus Modern Portfolio Theory Who’s Right FIN 402 Week 2 Assignment Case Problem 5.2 Susan Lussier’s Inherited Portfolio Does It Meet Her Needs FIN 402 Week 2 Assignment Case Problem 13.1 Assessing the Stalchecks’s Portfolio Performance (Part a,b,c,d)
FIN 402 Week 2 Assignment Case Problem 4.2 The Risk-Return Tradeoff Molly O’Rourke’s Stock Purchase Decision

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Case Problem 4.2 The Risk-Return Tradeoff: Molly O’Rourke’s Stock Purchase Decision Over the past 10 years, Molly O’Rourke has slowly built a diversified portfolio of common stock. Currently her portfolio includes 20 different common stock issues and has a total market value of $82,500. Molly is at present considering the addition of 50 shares of either of two common stock issues—X or Y. To assess the return and risk of each of these issues, she has gathered dividend income and share price data for both over the last 10 years (2007–2016). Molly’s investigation of the outlook for these issues suggests that each will, on average, tend to behave in the future just as it has in the past. She therefore believes that the expected return can be estimated by finding the average HPR over the past 10 years for each of the stocks. The historical dividend income and stock price data collected by Molly are given in the accompanying table. Questions a.        Determine the HPR for each stock 
FIN 402 Week 2 Assignment Case Problem 5.2 Susan Lussier’s Inherited Portfolio Does It Meet Her Needs

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Case Problem 5.2 Susan Lussier’s Inherited Portfolio: Does It Meet Her Needs? Susan Lussier is 35 years old and employed as a tax accountant for a major oil and gas exploration company. She earns nearly $135,000 a year from her salary and from participation in the company’s drilling activities. An expert on oil and gas taxation, she is not worried about job security—she is content with her income and finds it adequate to allow her to buy and do whatever she wishes. Her current philosophy is to live each day to its fullest, not concerning herself with retirement, which is too far in the future to require her current attention. A month ago, Susan’s only surviving parent, her father, was killed in a sailing accident.
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FIN 402 Week 2 Assignment Case Problem 13.1 Assessing the Stalchecks’s Portfolio Performance (Part a,b,c,d)

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Case Problem 13.1 Assessing the Stalchecks’s Portfolio Performance Mary and Nick Stalcheck have an investment portfolio containing four investments. It was developed to provide them with a balance between current income and capital appreciation. Rather than acquire mutual fund shares or diversify within a given class of investments, they developed their portfolio with the idea of diversifying across various asset classes. The portfolio currently contains common stock, industrial bonds, mutual fund shares, and options. They acquired each of these investments during the past three years, and they plan to purchase other investments sometime in the future. Currently, the Stalchecks are interested in measuring the return on their investment and assessing how well they have done relative to the market. 
FIN 402 Week 2 weekly Problem Set

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The Problem Set is provided to you to enable you to practice the concepts outlined in the textbook. Select THREE completed problems from the assignment and post your solutions to those problems. In your solutions, provide an explanation as to why you choose the answer.

1. If RF = 6 percent, b = 1.3, and the ERP = 6.5 percent, compute Ke(the required rate of return).

2. If in problem 1 the beta (b) were 1.9 and the other values remained the same, what is the new value of Ke? What is the relationship between a higher beta and the required rate of return (Ke)?

3. Assume the same facts as in problem 2, but with an ERP of 9 percent. What is the new value for Ke? What does this tell you about investors’ feelings toward risk based on the new ERP?

FIN 402 Week 2 weekly Problem Set

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1.      (2 point) Calculate the expected return of the following stocks using CAPM. You can use internet websites to get Beta figures, such as Yahoo! Finance, Google Finance, MSN Money, Marketwatch, etc. Use 4% as the risk free rate and 6% as the risk premium.

a.       Proctor & Gamble (PG)

b.      Microsoft (MSFT)

c.       Macy’s (M)

d.      JP Morgan Chase (JPM)

e.       Southern Company (SO)

2.      (2 points) Look up Microsoft’s financials on the internet. Sites to use include those listed above as well as the SEC’s website – www.sec.gov. Select two ratios from each of the following categories (8 calculations in total) and show your calculations. Be sure to show the formula and your calculations. No points will be given if work is not shown even if you get the correct answer.

Categories:

a.       Profitability ratios

b.      Asset-utilization ratios

c.       Liquidity ratios

d.      Debt ratios

FIN 402 Week 3 Assignment Case Problem 6.1 Sara Decides to Take the Plunge

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Case Problem 6.1 Sara Decides to Take the Plunge Sara Thomas is a child psychologist who has built a thriving practice in her hometown of Boise, Idaho. Over the past several years she has been able to accumulate a substantial sum of money. She has worked long and hard to be successful, but she never imagined anything like this. Even so, success has not spoiled Sara. Still single, she keeps to her old circle of friends. One of her closest friends is Terry Jenkins, who happens to be a stockbroker and who acts as Sara’s financial advisor. Not long ago Sara attended a seminar on investing in the stock market, and since then she’s been doing some reading about the market. She has concluded that keeping all of her money in low-yielding savings accounts doesn’t make sense. As a result, Sara has decided to move part of her money to stocks. One evening,
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FIN 402 Week 3 Assignment Case Problem 6.1, 6.2, 7.1, 7.2, 8.1, 8.2, 9.2

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FIN 402 Week 3 Assignment Case Problem 6.1 Sara Decides to Take the Plunge FIN 402 Week 3 Assignment Case Problem 6.2 Wally Wonders Whether There’s a Place for Dividends FIN 402 Week 3 Assignment Case Problem 7.1 Some Financial Ratios Are Real Eye-Openers FIN 402 Week 3 Assignment Case Problem 7.2 Doris Looks at an Auto Issue FIN 402 Week 3 Assignment Case Problem 8.1 Chris Looks for a Way to Invest His Wealth FIN 402 Week 3 Assignment Case Problem 8.2 An Analysis of a High-Flying Stock FIN 402 Week 3 Assignment Case Problem 9.2 Deb Takes Measure of the Market

FIN 402 Week 3 AssignmentCase Problem 6.2 Wally Wonders Whether There’s a Place for Dividends

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Case Problem 6.2 Wally Wonders Whether There’s a Place for Dividends Wally Wilson is a commercial artist who makes a good living by doing freelance work—mostly layouts and illustrations—for local ad agencies and major institutional clients (such as large department stores). Wally has been investing in the stock market for some time, buying mostly high-quality growth stocks as a way to achieve long-term growth and capital appreciation. He feels that with the limited time he has to devote to his security holdings, high-quality issues are his best bet. He has become a bit perplexed lately with the market, disturbed that some of his growth stocks aren’t doing even as well as many good-grade income shares. He therefore decides to have a chat with his broker, Al Fried. During their conversation, it becomes clear that both Al and Wally are thinking along the same lines. Al points out that dividend yields on income shares are indeed way up and that, because of the state of the economy, the outlook for growth stocks is not particularly bright.
FIN 402 Week 3 AssignmentCase Problem 7.1 Some Financial Ratios Are Real Eye-Openers

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Case Problem 7.1 Some Financial Ratios Are Real Eye-Openers Jack Arnold is a resident of Lubbock, Texas, where he is a prosperous rancher and businessman. He has also built up a sizable portfolio of common stock, which, he believes, is due to the fact that he thoroughly evaluates each stock he invests in. As Jack says, “You can’t be too careful about these things! Anytime I plan to invest in a stock, you can bet I’m going to learn as much as I can about the company.” Jack prefers to compute his own ratios even though he could easily obtain analytical reports from his broker at no cost. (In fact, Bob Smith, his broker, has been volunteering such services for years.) Recently Jack has been keeping an eye on a small chemical stock. The firm, South Plains Chemical Company, is big in the fertilizer business—which is something Jack knows a lot about. Not long ago, he received a copy of the firm’s latest financial statements (summarized here) 
FIN 402 Week 3 AssignmentCase Problem 7.2 Doris Looks at an Auto Issue

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Case Problem 7.2 Doris Looks at an Auto Issue Doris Wise is a young career woman. She lives in Phoenix, Arizona, where she owns and operates a highly successful modeling agency. Doris manages her modest but rapidly growing investment portfolio, made up mostly of high-grade common stocks. Because she’s young and single and has no pressing family requirements, Doris has invested primarily in stocks that offer the potential for attractive capital gains. Her broker recently recommended an auto company stock and sent her some literature and analytical reports to study. One report, prepared by the brokerage house she deals with, provided an up-to-date look at the economy, an extensive study of the auto industry, and an equally extensive review of several auto companies (including the one her broker recommended). She feels strongly about the merits of security analysis and believes it is important to spend time studying a stock before making an investment decision. 
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FIN 402 Week 3 AssignmentCase Problem 8.1 Chris Looks for a Way to Invest His Wealth

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Case Problem 8.1 Chris Looks for a Way to Invest His Wealth Chris Norton is a young Hollywood writer who is well on his way to television superstardom. After writing several successful television specials, he was recently named the head writer for one of TV’s top-rated sitcoms. Chris fully realizes that his business is a fickle one, and on the advice of his dad and manager, he has decided to set up an investment program. Chris will earn about a half-million dollars this year. Because of his age, income level, and desire to get as big a bang as possible from his investment dollars, he has decided to invest in speculative, high-growth stocks. Chris is currently working with a respected Beverly Hills broker and is in the process of building up a diversified portfolio of speculative stocks. The broker recently sent him information on a hot new issue.
FIN 402 Week 3 AssignmentCase Problem 8.2 An Analysis of a High-Flying Stock

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Case Problem 8.2 An Analysis of a High-Flying Stock Marc Dodier is a recent university graduate and a security analyst with the Kansas City brokerage firm of Lippman, Brickbats, and Shaft. Marc has been following one of the hottest issues on Wall Street, C&I Medical Supplies, a company that has turned in an outstanding performance lately and, even more important, has exhibited excellent growth potential. It has five million shares outstanding and pays a nominal annual dividend of $0.05 per share. Marc has decided to take a closer look at C&I to assess its investment potential. Assume the company’s sales for the past five years have been as follows: Marc is concerned with the future prospects of the company, not its past. As a result, he pores over the numbers and generates the following estimates of future performance: Questions a.        Determine the average annual rate of growth in sales over the past five years. (Assume sales in 2011 amounted to $7.5 million.
FIN 402 Week 3 AssignmentCase Problem 9.2 Deb Takes Measure of the Market

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Case Problem 9.2 Deb Takes Measure of the Market Several months ago, Deb Forrester received a substantial sum of money from the estate of her late aunt. Deb initially placed the money in a savings account because she was not sure what to do with it. Since then, however, she has taken a course in investments at the local university. The textbook for the course was, in fact, this one, and the class just completed this chapter. Excited about what she has learned in class, Deb has decided that she definitely wants to invest in stocks. But before she does, she wants to use her newfound knowledge in technical analysis to determine whether now would be a good time to enter the market. Deb has decided to use all of the following measures to help her determine if now is, indeed, a good time to start putting money into the stock market: • Advance-decline line •          New highs-new lows indicator (Assume the current 10-day moving average is 0 and the last 10 periods were each 0.) 
FIN 402 Week 3 Weekly Problem Set

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The Problem Set is provided to you to enable you to practice the concepts outlined in the textbook. Select THREE completed problems from the assignment and post your solutions to those problems. In your solutions, provide an explanation as to why you choose the answer.

1. Which of the following are assumptions of the simple CAPM model?

2. Consider the CAPM. The risk-free rate is 6% and the expected return on the market is 18%. What is the expected return on a stock with a beta of 1.3?

3. The market portfolio has a beta of __________.

4. You have a $50,000 portfolio consisting of Intel, GE and Con Edison. You put $20,000 in Intel, $12,000 in GE and the rest in Con Edison. Intel, GE and Con Edison have betas of 1.3, 1.0 and 0.8 respectively. What is your portfolio beta?

5. You put up $50 at the beginning of the year for an investment. The value of the investment grows 4% and you earn a dividend of $3.50. Your HPR was 

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FIN 402 Week 4 Assignment Case Problem 10.1 Max and Veronica Develop a Bond Investment Program

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Case Problem 10.1 Max and Veronica Develop a Bond Investment Program Max and Veronica Shuman, along with their teenage sons, Terry and Thomas, live in Portland, Oregon. Max is a sales rep for a major medical firm, and Veronica is a personnel officer at a local bank. Together they earn an annual income of around $100,000. Max has just learned that his recently departed rich uncle has named him in his will to the tune of some $250,000 after taxes. Needless to say, the family is elated. Max intends to spend $50,000 of his inheritance on a number of long-overdue family items (like some badly needed remodeling of their kitchen and family room, the down payment on a new Porsche Boxster, and braces to correct Tom’s overbite). Max wants to invest the remaining $200,000 in various types of fixed-income securities. Max and Veronica have no unusual income requirements or health problems. Their only investment objectives are that they want to achieve some capital appreciation, and they want to keep their funds fully invested for at least 20 years. 
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 FIN 402 Week 1 Assignment Case Problem 1.2 Preparing Carolyn Bowen’s Investment Plan

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Case Problem 1.2 Preparing Carolyn Bowen’s Investment Plan Carolyn Bowen, who just turned 55, is employed as an administrative assistant for the Xcon Corporation, where she has worked for the past 20 years. She is in good health, lives alone, and has two grown children. A few months ago her husband died, leaving her with only their home and the proceeds from a $75,000 life insurance policy. After she paid medical and funeral expenses, $60,000 of the life insurance proceeds remained. In addition to the life insurance proceeds, Carolyn has $37,500 in a savings account, which she had accumulated over the past 10 years. Recognizing that she is within 10 years of retirement, Carolyn wishes to invest her limited resources 
 FIN 402 Week 1 Assignment Case Problem 1.2, 2.1, 2.2, 3.1, 12.1

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FIN 402 Week 1 Assignment Case Problem 1.2 Preparing Carolyn Bowen’s Investment Plan FIN 402 Week 1 Assignment Case Problem 2.1 Dara’s Dilemma: What to Buy? FIN 402 Week 1 Assignment Case Problem 2.2 Ravi Dumar’s High-Flying Margin Account FIN 402 Week 1 Assignment Case Problem 3.1 The Perezes’ Good Fortune FIN 402 Week 1 Assignment Case Problem 12.1 Reverend Mark Thomas Ponders Mutual Funds

 FIN 402 Week 1 Assignment Case Problem 2.2 Ravi Dumar’s High-Flying Margin Account

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Case Problem 2.2 Ravi Dumar’s High-Flying Margin Account Ravi Dumar is a stockbroker who lives with his wife, Sasha, and their five children in Milwaukee, Wisconsin. Ravi firmly believes that the only way to make money in the market is to follow an aggressive investment posture—for example, to use margin trading. In fact, Ravi has built himself a substantial margin account over the years. He currently holds $75,000 worth of stock in his margin account, though the debit balance in the account amounts to only $30,000. Recently Ravi uncovered a stock that, on the basis of extensive analysis, he feels is about to take off. 
 FIN 402 Week 1 Assignment Case Problem 3.1 The Perezes’ Good Fortune

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Case Problem 3.1 The Perezes’ Good Fortune Angel and Marie Perez own a small pool hall located in southern New Jersey. They enjoy running the business, which they have owned for nearly three years. Angel, a retired professional pool shooter, saved for nearly 10 years to buy this business, which he and his wife own free and clear. The income from the pool hall is adequate to allow Angel, Marie, and their children, Mary (age 10) and José (age 4), to live comfortably. Although he lacks formal education beyond the 10th grade, Angel has become an avid reader. He enjoys reading about current events and personal finance, particularly investing. He especially likes Money magazine, from which he has gained numerous ideas for better managing the family’s finances. Because of the long hours required to run the business, Angel can devote 3 to 4 hours a day (on the job) to reading. Recently Angel and Marie were notified that Marie’s uncle had died and left them a portfolio of stocks and bonds with a current market value of $300,000. They were elated to learn of their good fortune but decided it would be best not to change their lifestyle as a result of this inheritance. Instead, they want their newfound wealth to provide for their children’s college educations as well as their own retirement. 
 FIN 402 Week 1 AssignmentCase Problem 2.1Dara’s Dilemma: What to Buy?

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Case Problem 2.1Dara’s Dilemma: What to Buy? Dara Simmons, a 40-year-old financial analyst and divorced mother of two teenage children, considers herself a savvy investor. She has increased her investment portfolio considerably over the past five years. Although she has been fairly conservative with her investments, she now feels more confident in her investment knowledge and would like to branch out into some new areas that could bring higher returns. She has between $20,000 and $25,000 to invest. Attracted to the hot market for technology stocks, Dara was interested in purchasing a tech IPO stock and identified NewestHighTech.com, a company that makes sophisticated computer chips for wireless Internet connections, as a likely prospect. The 1-year-old company had received some favorable press when it got early-stage financing and again when its chip was accepted by a major cell phone manufacturer. Dara also was considering an investment in 400 shares of Casinos International common stock, currently selling for $54 per share.
 FIN 402 Week 1 Individual Problem Set

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The Problem Set is provided to you to enable you to practice the concepts outlined in the textbook. Select THREE completed problems from the assignment and post your solutions to those problems.

1. Creating prices for securities and allowing for liquidity are functions of

2. Which of the following best describes the function of an investment banker selling an issue on a "best efforts" basis?

3. From the investment banker's point of view, the major reason syndicates are formed in the distribution of large issues is for the purpose of

4.  ___________ has two major functions: to handle special orders, such as purchases with a price contingency; and to maintain continuous, liquid, orderly markets

 FIN 402 Week 1 Individual Weekly Question

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Submit your Weekly Questions, with original questions, in a Microsoft Word or text file. Be sure to show your work to earn full credit.

 

Do not use Investopedia, About.com, Wikipedia, or other generic internet websites as sources. Use credible sources only.

Also, do not use quotes in lieu of a response in your own words.

 FIN 402 Week 2 Assignment Case Problem 2.1 Traditional Versus Modern Portfolio Theory Who’s Right

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Case Problem 2.1 Traditional Versus Modern Portfolio Theory: Who’s Right? Walt Davies and Shane O’Brien are district managers for Lee, Inc. Over the years, as they moved through the firm’s sales organization, they became (and still remain) close friends. Walt, who is 33 years old, currently lives in Princeton, New Jersey. Shane, who is 35, lives in Houston, Texas. Recently, at the national sales meeting, they were discussing various company matters, as well as bringing each other up to date on their families, when the subject of investments came up. Each had always been fascinated by the stock market, and now that they had achieved some degree of financial success, they had begun actively investing. As they discussed their investments, Walt said he thought the only way an individual who does not have hundreds of thousands of dollars can invest safely is to buy mutual fund shares. He emphasized that to be safe, a person needs to hold a broadly diversified portfolio and that only those with a lot of money and time can achieve independently the diversification that can be readily obtained by purchasing mutual fund shares. 
 FIN 402 Week 2 Assignment Case Problem 4.1 Coates’s Decision

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Case Problem 4.1 Coates’s Decision On January 1, 2017, Dave Coates, a 23-year-old mathematics teacher at Xavier High School, received a tax refund of $1,100. Because Dave didn’t need this money for his current living expenses, he decided to make a long-term investment. After surveying a number of alternative investments costing no more than $1,100, Dave isolated two that seemed most suitable to his needs. Each of the investments cost $1,050 and was expected to provide income over a 10-year period. Investment A provided a relatively certain stream of income. Dave was a little less certain of the income provided by investment B. From his search for suitable alternatives, Dave found that the appropriate discount rate for a relatively certain investment was 4%. Because he felt a bit uncomfortable with an investment like B, he estimated that such an investment would have to provide a return at least 4% higher than investment A. Although Dave planned to reinvest funds returned from the investments in other vehicles providing similar returns, he wished to keep the extra $50 ($1,100 − $1,050) invested for the full 10 years in a savings account paying 3% interest compounded annually. As he makes his investment decision, Dave has asked for your help in answering the questions that follow the 
 FIN 402 Week 2 Assignment Case Problem 4.1, 4.2, 2.1, 5.2, 13.1 (Part a,b,c,d)

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FIN 402 Week 2 Assignment Case Problem 4.1 Coates’s Decision FIN 402 Week 2 Assignment Case Problem 4.2 The Risk-Return Tradeoff Molly O’Rourke’s Stock Purchase Decision FIN 402 Week 2 Assignment Case Problem 2.1 Traditional Versus Modern Portfolio Theory Who’s Right FIN 402 Week 2 Assignment Case Problem 5.2 Susan Lussier’s Inherited Portfolio Does It Meet Her Needs FIN 402 Week 2 Assignment Case Problem 13.1 Assessing the Stalchecks’s Portfolio Performance (Part a,b,c,d)
 FIN 402 Week 2 Assignment Case Problem 4.2 The Risk-Return Tradeoff Molly O’Rourke’s Stock Purchase Decision

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Case Problem 4.2 The Risk-Return Tradeoff: Molly O’Rourke’s Stock Purchase Decision Over the past 10 years, Molly O’Rourke has slowly built a diversified portfolio of common stock. Currently her portfolio includes 20 different common stock issues and has a total market value of $82,500. Molly is at present considering the addition of 50 shares of either of two common stock issues—X or Y. To assess the return and risk of each of these issues, she has gathered dividend income and share price data for both over the last 10 years (2007–2016). Molly’s investigation of the outlook for these issues suggests that each will, on average, tend to behave in the future just as it has in the past. She therefore believes that the expected return can be estimated by finding the average HPR over the past 10 years for each of the stocks. The historical dividend income and stock price data collected by Molly are given in the accompanying table. Questions a.        Determine the HPR for each stock 
 FIN 402 Week 2 Assignment Case Problem 5.2 Susan Lussier’s Inherited Portfolio Does It Meet Her Needs

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Case Problem 5.2 Susan Lussier’s Inherited Portfolio: Does It Meet Her Needs? Susan Lussier is 35 years old and employed as a tax accountant for a major oil and gas exploration company. She earns nearly $135,000 a year from her salary and from participation in the company’s drilling activities. An expert on oil and gas taxation, she is not worried about job security—she is content with her income and finds it adequate to allow her to buy and do whatever she wishes. Her current philosophy is to live each day to its fullest, not concerning herself with retirement, which is too far in the future to require her current attention. A month ago, Susan’s only surviving parent, her father, was killed in a sailing accident.
 FIN 402 Week 2 Assignment Case Problem 13.1 Assessing the Stalchecks’s Portfolio Performance (Part a,b,c,d)

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Case Problem 13.1 Assessing the Stalchecks’s Portfolio Performance Mary and Nick Stalcheck have an investment portfolio containing four investments. It was developed to provide them with a balance between current income and capital appreciation. Rather than acquire mutual fund shares or diversify within a given class of investments, they developed their portfolio with the idea of diversifying across various asset classes. The portfolio currently contains common stock, industrial bonds, mutual fund shares, and options. They acquired each of these investments during the past three years, and they plan to purchase other investments sometime in the future. Currently, the Stalchecks are interested in measuring the return on their investment and assessing how well they have done relative to the market. 
 FIN 402 Week 2 weekly Problem Set

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The Problem Set is provided to you to enable you to practice the concepts outlined in the textbook. Select THREE completed problems from the assignment and post your solutions to those problems. In your solutions, provide an explanation as to why you choose the answer.

1. If RF = 6 percent, b = 1.3, and the ERP = 6.5 percent, compute Ke(the required rate of return).

2. If in problem 1 the beta (b) were 1.9 and the other values remained the same, what is the new value of Ke? What is the relationship between a higher beta and the required rate of return (Ke)?

3. Assume the same facts as in problem 2, but with an ERP of 9 percent. What is the new value for Ke? What does this tell you about investors’ feelings toward risk based on the new ERP?

 FIN 402 Week 2 weekly Problem Set

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1.      (2 point) Calculate the expected return of the following stocks using CAPM. You can use internet websites to get Beta figures, such as Yahoo! Finance, Google Finance, MSN Money, Marketwatch, etc. Use 4% as the risk free rate and 6% as the risk premium.

a.       Proctor & Gamble (PG)

b.      Microsoft (MSFT)

c.       Macy’s (M)

d.      JP Morgan Chase (JPM)

e.       Southern Company (SO)

2.      (2 points) Look up Microsoft’s financials on the internet. Sites to use include those listed above as well as the SEC’s website – www.sec.gov. Select two ratios from each of the following categories (8 calculations in total) and show your calculations. Be sure to show the formula and your calculations. No points will be given if work is not shown even if you get the correct answer.

Categories:

a.       Profitability ratios

b.      Asset-utilization ratios

c.       Liquidity ratios

d.      Debt ratios

 FIN 402 Week 3 Assignment Case Problem 6.1 Sara Decides to Take the Plunge

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Case Problem 6.1 Sara Decides to Take the Plunge Sara Thomas is a child psychologist who has built a thriving practice in her hometown of Boise, Idaho. Over the past several years she has been able to accumulate a substantial sum of money. She has worked long and hard to be successful, but she never imagined anything like this. Even so, success has not spoiled Sara. Still single, she keeps to her old circle of friends. One of her closest friends is Terry Jenkins, who happens to be a stockbroker and who acts as Sara’s financial advisor. Not long ago Sara attended a seminar on investing in the stock market, and since then she’s been doing some reading about the market. She has concluded that keeping all of her money in low-yielding savings accounts doesn’t make sense. As a result, Sara has decided to move part of her money to stocks. One evening,
 FIN 402 Week 3 Assignment Case Problem 6.1, 6.2, 7.1, 7.2, 8.1, 8.2, 9.2

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FIN 402 Week 3 Assignment Case Problem 6.1 Sara Decides to Take the Plunge FIN 402 Week 3 Assignment Case Problem 6.2 Wally Wonders Whether There’s a Place for Dividends FIN 402 Week 3 Assignment Case Problem 7.1 Some Financial Ratios Are Real Eye-Openers FIN 402 Week 3 Assignment Case Problem 7.2 Doris Looks at an Auto Issue FIN 402 Week 3 Assignment Case Problem 8.1 Chris Looks for a Way to Invest His Wealth FIN 402 Week 3 Assignment Case Problem 8.2 An Analysis of a High-Flying Stock FIN 402 Week 3 Assignment Case Problem 9.2 Deb Takes Measure of the Market

 FIN 402 Week 3 AssignmentCase Problem 6.2 Wally Wonders Whether There’s a Place for Dividends

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Case Problem 6.2 Wally Wonders Whether There’s a Place for Dividends Wally Wilson is a commercial artist who makes a good living by doing freelance work—mostly layouts and illustrations—for local ad agencies and major institutional clients (such as large department stores). Wally has been investing in the stock market for some time, buying mostly high-quality growth stocks as a way to achieve long-term growth and capital appreciation. He feels that with the limited time he has to devote to his security holdings, high-quality issues are his best bet. He has become a bit perplexed lately with the market, disturbed that some of his growth stocks aren’t doing even as well as many good-grade income shares. He therefore decides to have a chat with his broker, Al Fried. During their conversation, it becomes clear that both Al and Wally are thinking along the same lines. Al points out that dividend yields on income shares are indeed way up and that, because of the state of the economy, the outlook for growth stocks is not particularly bright.
 FIN 402 Week 3 AssignmentCase Problem 7.1 Some Financial Ratios Are Real Eye-Openers

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Case Problem 7.1 Some Financial Ratios Are Real Eye-Openers Jack Arnold is a resident of Lubbock, Texas, where he is a prosperous rancher and businessman. He has also built up a sizable portfolio of common stock, which, he believes, is due to the fact that he thoroughly evaluates each stock he invests in. As Jack says, “You can’t be too careful about these things! Anytime I plan to invest in a stock, you can bet I’m going to learn as much as I can about the company.” Jack prefers to compute his own ratios even though he could easily obtain analytical reports from his broker at no cost. (In fact, Bob Smith, his broker, has been volunteering such services for years.) Recently Jack has been keeping an eye on a small chemical stock. The firm, South Plains Chemical Company, is big in the fertilizer business—which is something Jack knows a lot about. Not long ago, he received a copy of the firm’s latest financial statements (summarized here) 
 FIN 402 Week 3 AssignmentCase Problem 7.2 Doris Looks at an Auto Issue

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Case Problem 7.2 Doris Looks at an Auto Issue Doris Wise is a young career woman. She lives in Phoenix, Arizona, where she owns and operates a highly successful modeling agency. Doris manages her modest but rapidly growing investment portfolio, made up mostly of high-grade common stocks. Because she’s young and single and has no pressing family requirements, Doris has invested primarily in stocks that offer the potential for attractive capital gains. Her broker recently recommended an auto company stock and sent her some literature and analytical reports to study. One report, prepared by the brokerage house she deals with, provided an up-to-date look at the economy, an extensive study of the auto industry, and an equally extensive review of several auto companies (including the one her broker recommended). She feels strongly about the merits of security analysis and believes it is important to spend time studying a stock before making an investment decision. 
 FIN 402 Week 3 AssignmentCase Problem 8.1 Chris Looks for a Way to Invest His Wealth

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Case Problem 8.1 Chris Looks for a Way to Invest His Wealth Chris Norton is a young Hollywood writer who is well on his way to television superstardom. After writing several successful television specials, he was recently named the head writer for one of TV’s top-rated sitcoms. Chris fully realizes that his business is a fickle one, and on the advice of his dad and manager, he has decided to set up an investment program. Chris will earn about a half-million dollars this year. Because of his age, income level, and desire to get as big a bang as possible from his investment dollars, he has decided to invest in speculative, high-growth stocks. Chris is currently working with a respected Beverly Hills broker and is in the process of building up a diversified portfolio of speculative stocks. The broker recently sent him information on a hot new issue.
 FIN 402 Week 3 AssignmentCase Problem 8.2 An Analysis of a High-Flying Stock

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Case Problem 8.2 An Analysis of a High-Flying Stock Marc Dodier is a recent university graduate and a security analyst with the Kansas City brokerage firm of Lippman, Brickbats, and Shaft. Marc has been following one of the hottest issues on Wall Street, C&I Medical Supplies, a company that has turned in an outstanding performance lately and, even more important, has exhibited excellent growth potential. It has five million shares outstanding and pays a nominal annual dividend of $0.05 per share. Marc has decided to take a closer look at C&I to assess its investment potential. Assume the company’s sales for the past five years have been as follows: Marc is concerned with the future prospects of the company, not its past. As a result, he pores over the numbers and generates the following estimates of future performance: Questions a.        Determine the average annual rate of growth in sales over the past five years. (Assume sales in 2011 amounted to $7.5 million.
 FIN 402 Week 3 AssignmentCase Problem 9.2 Deb Takes Measure of the Market

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Case Problem 9.2 Deb Takes Measure of the Market Several months ago, Deb Forrester received a substantial sum of money from the estate of her late aunt. Deb initially placed the money in a savings account because she was not sure what to do with it. Since then, however, she has taken a course in investments at the local university. The textbook for the course was, in fact, this one, and the class just completed this chapter. Excited about what she has learned in class, Deb has decided that she definitely wants to invest in stocks. But before she does, she wants to use her newfound knowledge in technical analysis to determine whether now would be a good time to enter the market. Deb has decided to use all of the following measures to help her determine if now is, indeed, a good time to start putting money into the stock market: • Advance-decline line •          New highs-new lows indicator (Assume the current 10-day moving average is 0 and the last 10 periods were each 0.) 
 FIN 402 Week 3 Weekly Problem Set

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The Problem Set is provided to you to enable you to practice the concepts outlined in the textbook. Select THREE completed problems from the assignment and post your solutions to those problems. In your solutions, provide an explanation as to why you choose the answer.

1. Which of the following are assumptions of the simple CAPM model?

2. Consider the CAPM. The risk-free rate is 6% and the expected return on the market is 18%. What is the expected return on a stock with a beta of 1.3?

3. The market portfolio has a beta of __________.

4. You have a $50,000 portfolio consisting of Intel, GE and Con Edison. You put $20,000 in Intel, $12,000 in GE and the rest in Con Edison. Intel, GE and Con Edison have betas of 1.3, 1.0 and 0.8 respectively. What is your portfolio beta?

5. You put up $50 at the beginning of the year for an investment. The value of the investment grows 4% and you earn a dividend of $3.50. Your HPR was 

 FIN 402 Week 4 Assignment Case Problem 10.1 Max and Veronica Develop a Bond Investment Program

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Case Problem 10.1 Max and Veronica Develop a Bond Investment Program Max and Veronica Shuman, along with their teenage sons, Terry and Thomas, live in Portland, Oregon. Max is a sales rep for a major medical firm, and Veronica is a personnel officer at a local bank. Together they earn an annual income of around $100,000. Max has just learned that his recently departed rich uncle has named him in his will to the tune of some $250,000 after taxes. Needless to say, the family is elated. Max intends to spend $50,000 of his inheritance on a number of long-overdue family items (like some badly needed remodeling of their kitchen and family room, the down payment on a new Porsche Boxster, and braces to correct Tom’s overbite). Max wants to invest the remaining $200,000 in various types of fixed-income securities. Max and Veronica have no unusual income requirements or health problems. Their only investment objectives are that they want to achieve some capital appreciation, and they want to keep their funds fully invested for at least 20 years. 
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