Finance

Running head: FINANCE
Finance
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1FINANCE
Table of Contents
Mini Case:........................................................................................................................................2
1. Expected return of return and standard deviation:.......................................................................2
2. Indicating the reward to risk ratio for the fund based on the fund’s standard deviation:............2
3. Calculating the expected return for the fund based on Capital Asset Pricing Model:.................2
Question:..........................................................................................................................................3
A. Calculating stock price and detecting its worth in 5 years:........................................................3
B. Calculating the bonds value and effective annual yield on the bond:.........................................3
C. Discussing the NPV, IRR and Payback period methods:...........................................................4
D. Discussing about the WACC in details and stating about its usefulness:...................................4
E. Discussing the difference between stock and bond, while discussing the relationship between
bond and interest rates:....................................................................................................................5
References and Bibliography:..........................................................................................................6

2FINANCE
Mini Case:
1. Expected return of return and standard deviation:
Probability (P) Return (R) PxR
0.1 50% 5.00%
0.5 35% 17.50%
0.35 5% 1.75%
0.05 -100% -5.00%
Expected return (Er)
19.25
%
Probability (P) Return (R) PxR R-Er Px(R-Er)^2
0.1 50% 5.00% 30.7500% 0.95%
0.5 35% 17.50% 15.7500% 1.24%
0.35 5% 1.75% -14.2500% 0.71%
0.05 -100% -5.00% -119.2500% 7.11%
Variance 10.01%
Standard deviation (SD) 31.63%
2. Indicating the reward to risk ratio for the fund based on the fund’s standard deviation:
Particulars Value
Expected return (Er) 19.25%
Standard deviation (SD) 31.63%
Interest rate (i) 4.50%
Risk reward ratio
(Er-i)/SD 0.47
3. Calculating the expected return for the fund based on Capital Asset Pricing Model:
Particulars Value