Finance: 30 Readable Questions All Related

Finance 30 Questionsread Readi Have 30 Questions All Ralated To Financ

Have 30 questions all related to Finance and I need to get it done by tonight. Some are multiple questions which is easy and some need calculations. Will probably take 30 minutes to 1 hour if you know what you are doing. The time limit is 1 hour 30 minutes starting from when I send you the questions. To be fair, I will post 4 questions here. If you think it is easy, please chat me with all 4 question answers and your rate for 30 questions. I do have answers for all 4 questions listed here so I will check your answers and I will know who to choose from.

Paper For Above instruction

The following paper addresses four selected finance questions among the total 30 questions provided. These questions encompass topics including stakeholders in finance, investment portfolio optimization, variance calculation in portfolios, and present value computation for annuities, demonstrating a range of fundamental financial concepts and analytical skills necessary for effective financial decision-making.

Question 1: Stakeholders in Finance

Which of the following groups are referred to as stakeholders? I) employees; II) customers; III) shareholders; IV) suppliers.

Stakeholders are all individuals or groups who have an interest in the performance and activities of a firm. In finance, stakeholders include employees, customers, shareholders, and suppliers, as each has a vested interest in the company's success or failure. Employees rely on the company for livelihood, customers for products and services, shareholders for return on investment, and suppliers for business continuity. Recognizing these stakeholder groups is crucial for understanding corporate finance strategies and governance, as they influence corporate decisions and are affected by financial outcomes.

Question 2: Combining Lending and Borrowing at Risk-Free Rate with Efficient Portfolios

By combining lending and borrowing at the risk-free rate with efficient portfolios, we can:

  • I) extend the range of investment possibilities;
  • II) change the set of efficient portfolios from being curvilinear to a straight line;
  • III) provide a higher expected return for any level of risk, except for the tangential portfolio and the risk-free asset.

This concept relates to the Capital Market Line (CML) in modern portfolio theory. Combining risk-free assets with the market portfolio expands the efficient frontier into a straight line (the CML), offering investors more options for balancing risk and return. This approach enhances diversification and allows investors to tailor portfolios according to their risk tolerance, improving the efficiency of capital allocation in financial markets.

Question 3: Variance of Portfolio Returns

Hyacinth Macaw invests 74% in stock I (standard deviation 13%) and the rest in stock J (standard deviation 27%). The correlation between their returns is 1.0, 0.7, and 0, respectively.

a. Correlation = 1.0

When the correlation coefficient is 1.0, the variance of the portfolio can be calculated as:

Portfolio Variance = (Weight of I)^2  (Std Dev of I)^2 + (Weight of J)^2  (Std Dev of J)^2 + 2  (Weight I)  (Weight J)  (Std Dev I)  (Std Dev J) *Correlation

Calculations:

0.74^2  0.13^2 + 0.26^2  0.27^2 + 2  0.74  0.26  0.13  0.27 * 1.0


= 0.5476  0.0169 + 0.0676  0.0729 + 2  0.74  0.26  0.13  0.27


= 0.00926 + 0.00493 + 2  0.74  0.26 * 0.0351


= 0.00926 + 0.00493 + 2  0.74  0.26 * 0.0351


= 0.00926 + 0.00493 + 2  0.1924  0.0351


= 0.00926 + 0.00493 + 2 * 0.00675


= 0.00926 + 0.00493 + 0.0135


= 0.02769

Variance = 0.02769 (rounded to 4 decimal places)

b. Correlation = 0.7

Calculate as above, substituting correlation = 0.7:

0.00926 + 0.00493 + 2  0.74  0.26  0.13  0.27 * 0.7


= 0.00926 + 0.00493 + 2  0.1924  0.0351 * 0.7


= 0.00926 + 0.00493 + 2  0.00675  0.7


= 0.00926 + 0.00493 + 2 * 0.004725


= 0.00926 + 0.00493 + 0.00945


= 0.02364

Variance ≈ 0.0236 (rounded to 4 decimal places)

c. Correlation = 0

Finally, for zero correlation:

0.00926 + 0.00493 + 0


= 0.00926 + 0.00493


= 0.01419

Variance ≈ 0.0142 (rounded to 4 decimal places)

Question 4: Present Value of an 11-year Annuity

Given an annual discount rate of 11.0%, to calculate the present value of an annuity of $51,300 per year for 11 years:

a. Payments at the end of each year starting one year from now

Using the present value of an ordinary annuity formula:

PV = P * [(1 - (1 + r)^-n) / r]

Where P = 51,300, r = 0.11, n=11:

PV = 51,300 * [(1 - (1 + 0.11)^-11) / 0.11]


= 51,300 * [(1 - (1.11)^-11) / 0.11]


= 51,300 * [(1 - 1 / (1.11)^11) / 0.11]


= 51,300 * [(1 - 1 / 3.045) / 0.11]


= 51,300 * [(1 - 0.3288) / 0.11]


= 51,300 * [0.6712 / 0.11]


= 51,300 * 6.102


≈ 313,089.60

Rounded to 2 decimal places, PV ≈ $313,089.60

b. Payments start in six months, with subsequent payments every 12 months

Payment arrives in 6 months, then every 12 months thereafter. This involves calculating the present value of a delayed annuity plus discounting as necessary:

PV = P  [(1 - (1 + r)^-n) / r]  (1 + r)^-t

Where t = 0.5 year (6 months) delay:

PV = 51,300  [(1 - (1.11)^-11) / 0.11]  (1 + 0.11)^-0.5


= 51,300  6.102  (1.11)^-0.5


= 313,089.60 * (1.11)^-0.5


= 313,089.60 / sqrt(1.11)


= 313,089.60 / 1.054


≈ 297,147.41

Rounded to 2 decimal places, PV ≈ $297,147.41

Conclusion

This selection of questions exemplifies key financial principles including stakeholder analysis, efficient portfolios, portfolio variance calculations under different correlations, and present value computations for annuities with differing payment timings. Mastery of these topics enhances a financial analyst's capability to evaluate investment risks, optimize portfolios, and assess financial products' value, ultimately contributing to more effective financial decision-making and strategic planning.

References

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  • Brealey, R. A., Myers, S. C., & Allen, F. (2020). Principles of Corporate Finance (13th ed.). McGraw-Hill Education.
  • Fabozzi, F. J. (2018). Bond Markets, Analysis and Strategies (10th ed.). Pearson.
  • Hull, J. C. (2018). Options, Futures, and Other Derivatives (10th ed.). Pearson.
  • Damodaran, A. (2012). Investment Valuation: Tools and Techniques for Determining the Value of Any Asset. Wiley.
  • Shapiro, A. C., & Moyer, R. C. (2012). Foundations of Financial Management. Pearson.
  • Harrison, M., & Platt, C. (2020). Investment Analysis and Portfolio Management. Cambridge University Press.
  • Bodie, Z., Kane, A., & Marcus, A. J. (2014). Investments (10th ed.). McGraw-Hill Education.
  • Lintner, J. (1965). The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets. The Review of Economics and Statistics, 47(1), 13–37.
  • Markowitz, H. (1952). Portfolio Selection. The Journal of Finance, 7(1), 77–91.

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