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week 2 assignmentsExplain why purchasing a high-growth mutual fund can be a worse
investment than taking out a second mortgage on a home and
investing in the market index.
Explain why purchasing a high-growth mutual fund can be a worse
investment than taking out a second mortgage on a home and
investing in the market index.
Read the case study “Waldo County” at the end of Chapter 10. In a two
–to –four page paper, address the following:
• Given the projections in the Table 10.8, in one- to –two pages,
calculate the NPV and interpret your results.
In one –to –two pages, construct a sensitivity and a scenario analysis of
the project and explain what these analyses reveal about the project’s
risks and potential value to the firm.
Explain why purchasing a high-growth mutual fund can be a worse
investment than taking out a second mortgage on a home and
investing in the market index.
Answer the following problem (set number 13) from the end of Chapter
9. Respond to at least two of your classmates’ posts.
The following table shows estimates of the risk of two well-known
Standard
Deviation, %
Toronto Dominion Bank
Research in Motion
25
44
Standard
R2
Beta
.66
1.26
.09
.82
.25
.08
Error of Beta
a What proportion of each stock’s risk was market risk, and
what proportion was specific risk?
b What is the variance of Toronto Dominion? What is the
specific variance?
c What is the confidence interval on Research in Motion’s
beta?
If the CAPM is correct, what is the expected return on Toronto
Dominion? Assume a risk-free interest rate of 5% and an
expected market return of 12%.
Read the case study “Waldo County” at the end of Chapter 10. In a two –to –
four page paper, address the following:
• Given the projections in the Table 10.8, in one- to –two pages, calculate the
NPV and interpret your results.
In one –to –two pages, construct a sensitivity and a scenario analysis of the
project and explain what these analyses reveal about the project’s risks and
potential value to the firm.

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