For Tankerwill66 as discussed - 47870

Solution Detail
Price: $10.00
  • From: Business,
  • Posted on: Mon 17 Mar, 2014
  • Request id: None
  • Purchased: 1 time(s)
  • Average Rating: (95) A+
Request Description

 

Week 7 DQ:

 

 

 

Question A

In chapter 7, it has been argued that stock’s market price can deviate from its intrinsic value. Discuss the following question: If all investors attempt to behave in an entirely rational manner, could these differences still exist? In answering this question, think about information that’s available to insiders versus outsiders, the fact that historical probabilities of financial events are “fuzzier” than probabilities related to physical items, and the validity of the concepts of animal spirits, herding and anchoring.

 

 

 

 

Question B

Suppose you owned a portfolio consisting of $250,000 of U.S. government bonds with a maturity date of 30 years. Would your portfolio be riskless? What if your portfolio consisted of $250,000 of 30-day Treasury bills? Every 30 days your bills mature, and you reinvest the principle ($250,000) in a new batch of bills. Assume that you live on the investment income from your portfolio and that you want to maintain a constant standard of living. Is your portfolio truly riskless? Can you think of any asset that would be completely riskless? What security comes closest to being riskless? Explain.

 

 

Solution Description

 

Week 7 DQ:

 

 

 

Question A

 

In chapter 7, it has been argued that stock’s market price can deviate from its intrinsic value. Discuss the following question: If all investors attempt to behave in an entirely rational manner, could these differences still exist? In answering this question, think about information that’s available to insiders versus outsiders, the fact that historical probabilities of financial events are “fuzzier” than probabilit