Finance Question

Description

Assignment Questions

Q1: Why do most investors prefer to hold a diversified portfolio of securities as opposed to placing all of their wealth in a single asset?

Q2: Given the following financial data, compute:

a. Return on equity.

b. Quick ratio.

c. Long-term debt to equity.

d. Fixed-charge coverage.

Assets:

Cash

$ 2,500

Accounts receivable

3,000

Inventory

6,500

Fixed assets

8,000

Total assets

$20,000

Liabilities and stockholders’ equity:

Short-term debt

$ 3,000

Long-term debt

2,000

Stockholders’ equity

15,000

Total liabilities and stockholders’ equity

$20,000

Income before fixed charges and taxes

$ 4,400

Interest payments

800

Lease payment

400

Taxes (35 percent tax rate)

1,120

Net income (after-taxes)

$ 2,080

Q3: Explain the benefits derived from investing in deep discount bonds.

Q4: Explain how to manage bond portfolios and what are the portfolio management strategies.

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