(a) Compute the betas of AOL, Microsoft, and Intel with respect to the tangency portfolio found in exercise 5.2. (b) Then compute the beta of an equally weighted portfolio of the three stocks.

3M is a large, diversified, technology company that has numerous business units and manufactures thousands of products. Go to http://www.3m.com and a. identify the major market or industry sectors that the firm serves; b. describe a new product that 3M has recently introduced for the health-care sector.

A 2-year default-free straight-coupon bond has annual coupons of $8 per $100 of face value. Assume that a default-free zero-coupon bond with one year to maturity sells for $90 per $100 of face value and that a default-free zero-coupon bond with two years to maturity sells for $80 per $100 of face value. a. What is the no-arbitrage price of the straight-coupon 8 percent bond? b. What is the...

A 3-year coupon bond has payments as follows: This 8 percent coupon bond is currently trading at par ($100). a. What is the annually compounded yield of the bond? b. Compute the MacAuley duration and ordinary DV01 (calculated with respect to the annually compounded bond yield). c. Using DV01, how much do you expect this bond’s price to rise if the yield on the bond declines by 10 basis points...

A 30-year fixed-rate mortgage has monthly payments of $1,500 per month and a mortgage interest rate of 9 percent per year compounded monthly. If a buyer purchases a home with the cash proceeds of the mortgage loan plus an additional 20 percent down, what is the purchase price of the home?

A 35-year-old employee, who expected to work another 30 years, is injured in a plant accident and will never work again. His wages next year will be $40,000. A study of wages across the plant found that every additional year of seniority tends to add 1 percent to the wages of a worker, other things held constant. Assuming a nominal discount rate of 10 percent and an expected rate of inflation of...

A 5 percent corporate bond maturing November 14, 2020 (originally a 25-year bond at issue), has a yield to maturity of 6 percent (a 3 percent discount rate per 6-month period for each of its semiannual payments) for the settlement date, June 9, 2001. What is the flat price, full price, and accrued interest of the bond on June 9, 2001?

A business marketing manager often has great difficulty in arriving at the optimum price level for a product. First, describe the factors that complicate the pricing decision. Second, outline the approach you would follow in pricing an industrial product. Be as specific as possible.