6 Given the following three assets, determine whether an arbitrage opportunity exists according to the arbitrage pricing theory. If so, please calculate the excess return of the arbitrageportfolio; if there is no arbitrage opportunity, please enter zero as your answer. (Assume the weight in B is standardized to 1 or -1 depending on the position)Answers must be entered with 2 decimal places and no percent signs, e.g. 6 as 6.00; 32.346 as 32.35.AssetE(r) (%)Weights10ABC15जBeta1.01.320.0The arbitrage excess return is%.

Name: 6 Given the following three assets, determine whether an arbitrage opp
Uploaded: 2024-03-20T06:50:59.000Z
Channel: Bartleby
Description: 6 Given the following three assets, determine whether an arbitrage opportunity exists according to the arbitrage pricing theory. If so, please calculate the excess return of the arbitrageportfolio; if there is no arbitrage opportunity, please enter z

Answered: The arbitrage excess return is %.

Business

Finance

The arbitrage excess return is %.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 14MC: This calculation determines profitability or growth potential of an investment, expressed as a...

See similar textbooks

Similar questions

s XYZ stock price and dividend history are as follows: Beginning-of-Year Dividend Paid at Year-End Price $4 $ 124 135 115 120 Year 2018 2019 2020 2021 An investor buys six shares of XYZ at the beginning of 2018, buys another two shares at the beginning of 2019, sells one share at the beginning of 2020, and sells all seven remaining shares at the beginning of 2021 Required: a. What are the arithmetic and geometric average time-weighted rates of return for the investor? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Arithmetic time weighted average returns Geometric time weighted average returns b-1. Prepare a chart of cash flows for the four dates corresponding to the turns of the year for January 1, 2018, to January 1, 2021. (Negative amounts should be indicated by a minus sign.) Date 01/01/2018 01/01/2019 01/01/2020 01/01/2021 % % Cash Flow D
Determine the present value of the following single amounts. Note: Use tables, Excel, or a financial calculator. Round your final answers to nearest whole dollar amount. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Determine the present value of the following single amounts. Note: Use tables, Excel, or a financial calculator. Round your final answers to nearest whole dollar amount. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) 1. 2. 3. 4. Future Amount $ 25,000 $ 19,000 $ 30,000 $ 45,000 ¡= 6% 10% 12% 11% n = 11 14 29 10 Present Value
Given the assets: ri = r2 = and r3 = with q1 = 1, q2 = 1.5 and 93 2 respectively, compute the no arbitrage price of the asset r4 = 4r3 – 2r2 + r1.
1.) The option is currently a.) In-the-money b.) At-the-money c.) Out-the-money 2.) In/At/Out- the money by _____ pesos. 3.) What is the Intrinsic Value
(;). » - ( ) Consider two assets: rı = 3 If the asset prices are q1 = 1, q2 = 2 () 1+ a respectively, does the price of an asset with returns 1 in the two states - a. = 1 - a satisfy the no arbitrage property? (Record your answer as respectively, q 'True' (=yes) or 'False' (=no).
P 9-2 Investment Scenarios (LO 9-3) Arkansas Best Freightways is considering a purchase of three different potential trucks but is uncertain of the cash inflows associated with the following investment scenarios. Year Year 0 (today) Year 1 Year 2 Year 3 Year 4 Buy new truck Increased profits Increased profits Increased profits Increased profits Investment 1 (85,000) 25,000 25,000 25,000 25,000 Investment 2 (105,000) 20,000 30,000 40,000 50,000 Investment 3 (125,000) 40,000 30,000 20,000 10,000
A competitive lender makes loans to a pool of borrowers that are identical. After borrowers have received their loans they choose one of two investment projects. with probability Pg. With probability 1 – Pg, Project G pays a rate of return of -1, the borrower defaults on the loan, and the lender receives Project G pays the borrower a rate of return of r. nothing. Project B pays the borrower a rate of return of rB with probability pp. And with probability 1 – Pb, Project B pays a rate of return of -1, the borrower defaults on the loan, and the lender receives nothing. Pb, and P,(1+ rg) > Po(1+ rb). Suppose rg 0.98, pr = 0.4, rp = 0.02, L = 1. We assume as usual that rg 0.10, rb 0.12, Pg %3D The lender can't distinguish between borrower types and so it charges all borrowers the same interest rate rL. The lender lends an amount L and pays interest rp on funds acquired from depositors. Round your answer to at least three decimal places.
1._____________ is the rate at which the net present value becomes zero. a. None of the options b. Accounting rate of return c. Adjusted rate of return d. Internal rate of return
1.) The option is currently a.) In-the-money b.) At-the-money c.) Out-the-money 2.) In/At/Out- the money by _____ pesos.
David Davis is evaluating two new business opportunities. Each of the opportunities shown below has a 15-year life. David uses a 12% discount rate. Option 1 Option 2 Equipment purchase and installation $72,000 $82,500 Annual cash flow $28,400 $30,750 Equipment overhaul in year 6 $4,720 Equipment overhaul in year 8 $5,860
Suppose that we can describe the world using two states and that two assets are available, asset X an asset Y. We assume the asset’s future prices have the following distribution State Future Price Asset X Future Price Asset Y 1 $25 $50 2 $20 $40 The values of the unit claims implied by these assets are such that: A. C1 and C2 cannot be determined B. C1=1 and C2=1 C. C1=1, but we cannot determine C2 D. C1=5/4 and C2=5/4
Match each term with the best definition or descriptor. NPV is __________ ( a unitless ratio, a unit of time, a dollar vallue, or a rate of return). IRR is ___________ ( a unitless ratio, a unit of time, a dollar vallue, or a rate of return). Profitability index is __________( a unitless ratio, a unit of time, a dollar vallue, or a rate of return).