Full Cfin 4 4Th Edition Besley Solutions Manual Online PDF All Chapter
Full Cfin 4 4Th Edition Besley Solutions Manual Online PDF All Chapter
Full Cfin 4 4Th Edition Besley Solutions Manual Online PDF All Chapter
Manual
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Chapter 8 CFIN4
Chapter 8 Solutions
4.5%
c. CV = = 0.429
10.5%
21.573%
c. CV = = 2.397
9%
13.865%
c. CV A = = 1.387
10%
8.718%
CV B = = 0.513
17%
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Chapter 8 CFIN4
8-4 To answer the question, the coefficient of variation for each investment must be computed.
Investment r̂ CV
Stock M 6.0% 4.0% 0.667 = 4%/6%
Stock N 18.0 12.0 0.667 = 12%/18%
Stock O 12.0 7.0 0.583 = 7%/12%
According to the CV measure, Stock O has the best risk/return relationship; its risk per unit of return is
the lowest at 0.583.
8-5 To answer the question, the coefficient of variation for each investment must be computed.
Investment r̂ CV
F 16.0% 7.0% 0.438 = 7%/16%
G 27.0 13.0 0.481 = 13%/27%
According to the CV measure, Investment F has the better risk/return relationship; its risk per unit of
return is the lower at 0.438.
$9,000 $21,000
r̂P = 18% + $9,000 + $21,000 8%
$9,000 + $21,000
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Chapter 8 CFIN4
Alternative solution: First compute the return for each stock using the CAPM equation
[rRF + (rM – rRF)βj], and then compute the weighted average of these returns.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Chapter 8 CFIN4
d. The portfolio standard deviation is much lower than the standard deviation for either of the
investments, because the investments’ returns are negatively correlated. Notice that when
Investment ABC’s return is highest, Investment RST’s return is lowest, and vice versa. In fact, the
two investments’ returns are strongly negatively correlated, which resulted in a substantial
reduction is risk when the two investments were combined to form a portfolio.
βX = 1.5/0.6 = 2.5
$40,000 $10,000
8-11 new = 1.2 + 2.2 $40,000 + $10,000 = 1.2(0.8) + 2.2(0.2) = 1.4
$40,000 + $10,000
Because the beta coefficient for the portfolio will be 1.0 after the stock is sold for $48,000, we know that
the remaining stocks, which are worth $72,000 = $120,000 – $48,000, must have a weighted average
beta equal to 1.0. And, in combination, the weighted average beta for the stocks that make up the
current (pre-sale) portfolio must be 0.8, which means that the following situation must exist:
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Chapter 8 CFIN4
Because the beta coefficient for the portfolio will be 1.3 after the stock is sold for $40,000, we know that
the remaining stocks, which are worth $160,000 = $200,000 – $40,000, must have a weighted average
beta equal to 1.3. And, in combination, the weighted average beta for the stocks that make up the
current (pre-sale) portfolio must be 1.5, which means that the following situation must exist:
8-14 rRF = 3%
RRM = 6%
β = 1.5
r = 3% + (6%)1.5 = 12%
8-15 rRF = 4%
rM = 12%
β = 2.5
8-16 rRF = ?
rM = 12.5%
β = 0.8
rZR = 11%
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Chapter 8 CFIN4
8-17 rRF = 5%
rM = 11%
βV = 2.0
βW = 0.5
rW = 5% + (11% - 5%)0.5 = 8%
The required return for Stock V is 9% = 17% - 8% higher than the required return for Stock W.
Original RPM = 9% - 4% = 5%
Correct RPM = 5% + 1% = 6%
$1.75(1.04)
r̂U = + 0.04 = 0.105 = 10.5%
$28
In this case, the expected rate of return, r̂U , is greater than the required rate of return, rU, which means
the $28 selling price is too low. Investors should want to buy the stock, which will increase the price of
the stock to its equilibrium value of $31.38:
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accessible website, in whole or in part.
Chapter 8 CFIN4
$1.75(1.04) $1.82
P̂0 = = = $31.38
0.098 − 0.04 0.058
Based on the dividend discount model, we know the following relationship exists:
$2(1 + g)
$37.50 =
0.106 − g
$2(1 + g)
$37.50 =
0.106 − g
$37.50(0.106 − g) = $2 + $2g
$39.50g = $1.975
$1.975
g= = 0.05 = 5.0%
$39.50
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but not always connected with, right motor paralysis we have the
inability to use words in speaking, known as aphasia, aphemia,
alalia, and others. The first of these names is the one most
frequently used. Agraphia is the inability to use words in writing.
There are many degrees and kinds of amnesic aphasia, and, in fact,
every case is a study by itself. The slightest might be called
physiological; at any rate, it is sufficiently common among people
supposed to be well, and consists in the failure to recollect in time for
use the name, most frequently of a person, but sometimes of a thing,
which is really well known, is recognized at once if suggested, and
perhaps returns spontaneously at a later period. Another person may
forget only some words which are not recalled at any time, or parts
of words. A man appeared among the out-patients at St.
Bartholomew's Hospital who had his name written on a piece of
paper, because he could not say it, but could carry on a long
conversation. There were a few other words he could not say. The
more complete cases have no vocabulary at all, or only a few words
or syllables applied to all purposes, and perhaps an exclamation or
two. In these cases the patient may know perfectly well that he is not
expressing his ideas, and he may recognize perfectly well the word
when it is told to him or reject a wrong one. If he be, as happens in
nearly all cases, unable to pronounce the word after he has
recognized it as the one he wished for, there is a combination of
ataxic and amnesic aphasia. Incorrect or deficient words may be
corrected or supplemented by gestures or intonation. “Yes” may do
duty without confusion for “yes” or “no,” according to the tone.
Oaths may be retained, and sometimes an exclamation may be
uttered with perfect propriety of application which cannot be
repeated deliberately a moment afterward. This emotional use of
words may be considered akin to the movement executed by
paralyzed limbs under the stimulus of a movement taking place
elsewhere, and may lead to an erroneous prognosis of recovery.
This curious fact, that more or less automatic expressions are
possible when deliberately-willed pronunciation is not, is a probable
explanation for the observation which has occasionally been made
that an aphasic patient is able to sing words which he cannot speak.
40 L'Encephale, 1883, 2.
This affection is not a common one, and Weir Mitchell states that it is
common in inverse proportion to the age. He thinks it possible that
some of the congenital choreas may be the result of, or at least
closely connected with, intra-uterine cerebral paralysis. It remains for
years or for life. In the absence of history such a case might present
difficulties of diagnosis from the more usual hemichorea, which is not
infrequently accompanied by considerable weakness of the affected
side.
FIG. 41.
FIG. 42.
The modifications undergone by the urine in a case of cerebral
hemorrhage are increase of quantity amounting to polyuria, the urine
becoming limpid and afterward returning to the usual color; a
diminution in the quantity of urea coinciding with the fall of
temperature, and afterward a return to the normal or even above it.
When this augmentation is considerable, it constitutes at the same
time with a marked elevation of temperature an unfavorable
prognostic sign.46 In a case under the observation of the writer,
probably of thrombosis, the acid urine has been remarkable for the
amount of mucus contained in it, so that it pours from one vessel to
another like white of egg. There is a small amount of pus, but no
vesical irritation whatever.
46 Ollivier, Archives de Physiol., 1876.
Since the trophic centres for the muscles are situated in the spinal
cord, cerebral hemiplegia, which does not cut off their connection,
does not produce the rapid wasting seen in some cases of spinal
paralysis, unless descending degeneration involves the anterior gray
columns. The limbs preserve their fulness for a time, although the
muscular masses become flabby and slowly atrophy for want of use.
This atrophy, however, seldom becomes extreme. The skin of the
hands becomes dry, the folds at the knuckles disappear, and the
hand loses its expression, looking more like a stuffed glove. The
change, however, is not much greater than may be seen in a hand
kept for a long time in a bandage. The growth of the nails is retarded,
as may be seen by staining them with nitric acid.
Much importance has been attached to the fact that large sloughs
form with great rapidity upon the nates of the paralyzed side, and
Charcot says that this tendency is greater than can be accounted for
in any mechanical way. He therefore thinks that a direct trophic
influence of the brain upon nutrition is shown. At the very most,
however, that can only be a contributory cause, and the freedom of
other portions from a similar condition—and that, too, in regions
farther removed from the centres of circulation—makes it highly
improbable that anything more is necessary to account for it than the
less sensitiveness of that side to irritation from urine, roughnesses in
the bed, or pressure, and hence neglect. The writer, among a very
considerable number of hemiplegias, fatal and otherwise, does not
remember to have seen a well-marked case of the kind. Scrupulous
cleanliness and changing the position sufficiently often make the
preference for the paralyzed side a very slight one.
Arthropathies, consisting in a vegetating, and sometimes an
exudative, synovitis, and accompanied by swelling, redness, and
pain, are sometimes observed, especially in the upper extremity.
They do not appear until fifteen days or a month after the attack.
The arms are usually flexed at the elbow, the wrists on the arm, and
the fingers in the hand. Sometimes, however, the arm is straight. The
leg, which is not always affected to the same extent, is generally in
extension, though the toes are likely to be flexed. Attempts to move
the limbs are resisted strongly, and in such a way as to show the
reflex nature of the phenomenon. If an attempt be made to open the
fingers of a contractured hand slowly and carefully, it can be often
accomplished and the hand held open with but little pressure, but if it
is twitched the fingers resist like a spring. The violent attempt to
overcome rigidity is often painful.
In some rare cases rapid atrophy of the muscles of one limb may
take place. This has been found to coincide with extension of
degenerative changes in the cord to the anterior gray columns.
After the time for the initial depression has passed, rapidly-rising
temperature is very strong evidence in favor of apoplexy. If the
patient be only partially unconscious and able to protest against
being handled, to make some short answers, or even be inclined to
be combative, this is not to be taken as evidence of alcohol.
Hemiplegia may then be noticed. This condition of excitement may
be observed in the early stage of an apoplectic attack before it
deepens into coma. Unfortunately, when the lesion is situated in
certain portions of the brain, as in the extremities of either the frontal
or occipital lobes, there may be no paralysis, but then also there is
less likelihood of the extreme symptoms we are supposing to be
present. In the cerebellum, however, the symptoms may be very
severe without hemiplegia, and the diagnosis correspondingly
difficult. Vomiting, not caused by the presence of large quantities of
food or liquor, and persisting after the stomach is once emptied,
would be of some value in this case, but it would often be necessary
to wait for a diagnosis. Cerebellar hemorrhage is, however, a very
rare accident, and cerebellar embolism sufficiently large to cause
apoplectiform symptoms still more so. A limited lesion in the pons
may cause gradually-increasing stupor without distinct paralysis.
Chloroform, especially if swallowed, and chloral might possibly give
rise to difficulties in the way of diagnosis, and would have to be
distinguished on the same general principles as alcohol and opium.
Injuries to the head should be carefully looked for in any case with
unknown history. Actual fracture, which perhaps leads to no
depression of bone, may give rise to hemorrhage, probably
meningeal, which will cause the usual symptoms, and a shock which
is not accompanied by fracture may cause considerable laceration of
the brain with consequent hemorrhage. In the latter case, however,
unless the brain be already predisposed by arterial disease, the
laceration and hemorrhage will not be extreme and the symptoms
will be those of concussion. The diagnosis can hardly be said to be
between hemorrhage and concussion, but whether the hemorrhage
be the result of concussion—a question which can hardly be
answered without the history and observation of the further progress.
Cuts and bruises may result from a fall caused by the shock, and
pericranial ecchymoses may result from cerebral hemorrhage
through the vaso-motor system without the intervention of accident.
After the severer apoplectic symptoms have passed off, and in cases
where they have never been present, the diagnosis, so far as most
of the conditions mentioned above is concerned, is divested of many
of its difficulties when we are dealing with cases of well-marked
hemiplegia. The chief points left are the distinctions from the
apoplectiform attacks of general paralysis, cerebral syphilis, and
cerebral tumor, which are to be made as already pointed out.
In the vast majority of cases the lesion is situated upon the side of
the brain opposite to the paralysis, except in some instances of
cerebellar lesion, while in the peculiar form known as alternate
paralysis due to lesion of the pons it is on the opposite side to the
paralysis of the limbs and on the same side with the facial. It should
be distinctly stated, however, that there are exceptions which are
inexplicable on the present basis of cerebral anatomy. It is well
known that only a part of the motor tracts cross to the other side of
the cord at the decussation, and also that the proportion between the
fibres which do and those which do not cross is a variable one. It has
been suggested, in some cases of the kind mentioned, that all the
motor fibres, instead of only a minority, as is usual, pass down on the
same side of the cord as their origin. This has not been
demonstrated. The number of such cases are so small that it need
not be taken into account in diagnosis, and if the practitioner should