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    1 Why Is The T Bill S Return Independent of The State

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    Amit Pandey
    The document discusses investing $100,000 for a client with a 1-year holding period. It provides a table with investment alternatives (T-bills, Alta Industries, Repo Men Inc., American Foam, stock index fund) and their associated probabilities and returns based on the state of the economy. T-bills are considered a risk-free return regardless of the economy because their return is guaranteed by the U.S. government. Alta Industries and the stock index fund are expected to fluctuate with the economy, while Repo Men Inc. is expected to move in the opposite direction of the economy. The document asks why the T-bill and these companies' returns behave differently relative to the economic conditions.

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    1 Why Is The T Bill S Return Independent of The State

    Uploaded by

    Amit Pandey
    19 views1 page
    The document discusses investing $100,000 for a client with a 1-year holding period. It provides a table with investment alternatives (T-bills, Alta Industries, Repo Men Inc., American Foam, stock index fund) and their associated probabilities and returns based on the state of the economy. T-bills are considered a risk-free return regardless of the economy because their return is guaranteed by the U.S. government. Alta Industries and the stock index fund are expected to fluctuate with the economy, while Repo Men Inc. is expected to move in the opposite direction of the economy. The document asks why the T-bill and these companies' returns behave differently relative to the economic conditions.

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    1 Why is the t Bill s Return Independent of the State

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    The document discusses investing $100,000 for a client with a 1-year holding period. It provides a table with investment alternatives (T-bills, Alta Industries, Repo Men Inc., American Foam, stock index fund) and their associated probabilities and returns based on the state of the economy. T-bills are considered a risk-free return regardless of the economy because their return is guaranteed by the U.S. government. Alta Industries and the stock index fund are expected to fluctuate with the economy, while Repo Men Inc. is expected to move in the opposite direction of the economy. The document asks why the T-bill and these companies' returns behave differently relative to the economic conditions.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    19 views1 page

    1 Why Is The T Bill S Return Independent of The State

    Uploaded by

    Amit Pandey
    The document discusses investing $100,000 for a client with a 1-year holding period. It provides a table with investment alternatives (T-bills, Alta Industries, Repo Men Inc., American Foam, stock index fund) and their associated probabilities and returns based on the state of the economy. T-bills are considered a risk-free return regardless of the economy because their return is guaranteed by the U.S. government. Alta Industries and the stock index fund are expected to fluctuate with the economy, while Repo Men Inc. is expected to move in the opposite direction of the economy. The document asks why the T-bill and these companies' returns behave differently relative to the economic conditions.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    Solved: 1 Why is the T bill s return independent of the state

    (1) Why is the T-bill’s return independent of the state of the economy? Do T-bills promise a
    completely risk-free return?
    (2) Why are Alta Industries’ returns expected to move with the economy whereas Repo Men’s
    are expected to move counter to the economy?
    Assume that you recently graduated with a major in finance, and you just landed a job as a
    financial planner with Barney Smith Inc., a large financial services corporation. Your first
    assignment is to invest $100,000 for a client. Because the funds are to be invested in a
    business at the end of 1 year, you have been instructed to plan for a 1-year holding period.
    Further, your boss has restricted you to the investment alternatives shown in the table with their
    probabilities and associated outcomes. (Disregard for now the items at the bottom of the data;
    you will fill in the blanks later.) Barney Smith’s economic forecasting staff has developed
    probability estimates for the state of the economy, and its security analysts have developed a
    sophisticated computer program that was used to estimate the rare of return on each alternative
    under each state of the economy. Alta Industries is an electronics firm; Repo Men Inc. collects
    past-due debts; and American Foam manufactures mattresses and various other foam
    products. Barney Smith also maintains an “index fund” that owns a market-weighted fraction of
    all publicly traded stocks; you can invest in that fund, and thus obtain average stock market
    results. Given the situation as described, answer the followingquestions.

    1 Why is the T bill s return independent of the state

    ANSWER
    https://solvedquest.com/1-why-is-the-t-bill-s-return-independent-of-the-state/

    Reach out to [email protected] for enquiry.


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