INSTRUCTIONS.
A. SHOW YOUR WORK.
B. YOU OUGHT TO ANSWER SEVEN (7) QUESTIONS. EACH ONE IS WORTH 14 POINTS. YOU OUGHT TO DO THE FIRST TWO (2) PROBLEMS AND THE FIRST ESSAY. MOREOVER, YOU SHOULD DO FOUR (4) MORE QUESTIONS FROM EITHER THE ESSAYS OR THE PROBLEMS SECTION.
C. YOUR GRADE IS BASED ON YOUR ELUCIDATION, CONVICTION, CORRECTNESS AND ELABORATION.
TEST
I.PROBLEMS
A. We want to compute the EPS of Chary. It has 2 m shares outstanding and $80 of book value of equity. Chary expects to sell $20m worth of sales and have EAT of $5m and keep 40% of its profit. Furthermore, it has $100m of assets. Its coe is .12 and its bheta is 1.2. Calculate Chary’s EPS.
B. Problem # 5 on page 586
C. Problem #3 on page 585
D. Problem #4 on page 585.
E. Problem #6 on page 586
F. Problem # 7 on page 586. .
G .Problem # 8 on page 587
H. We buy common shares for $20 a share. In order to protect our position, we may invest in options. We may buy (or sell) put options at $1 premium for an exercise price of $24 with an expiration of six months. We also may invest in call options, with the same strike price, which cost 1.5 with the same expiration date.
1. What is prudent to do, in case we predict the stock market will crash.
2. We buy stock as above with the same data given, describe the best policy to undertake if we expect a substantial market increase
II.ESSAYS
A. Explicate the EPS as a performance measure.
B. Discuss 3 Fundamental strategies investors may use to beat the market.
C. Compare and contrast integrated asset allocation with insured asset allocation
D. Compare and contrast strategic with tactical asset allocation
E. Analyze regulation and legal issues, dividend yield and level, buying back stock, increasing dividends, splitting shares and acquisitions expectations as ways in which the rate of return of stocks is affected. What is the scientific evidence on these issues?
F .Talk on three principles Warren Buffett and Peter Lynch use in their money managing pursuits.
G. Compare and contrast value to growth investing
H. Expound on price to book, price to earnings, market capitalization and debt mean for stock valuation.