FXP Stock Trading

Fraction of the 500 Companies Meeting the Criterion

• Understanding Chart Pattern Book For Traders
• How To Follow Mutual Fund Trends For Profit
• How You Can Finally Be a Profitable Swing Trader

Product lines compatible

Company will increase combined sales growth rate Balance sheet impact manageable

If the criteria are independent, how many companies will pass the screen?

8. You apply both valuation criteria and financial strength criteria in choosing stocks. The probability that a randomly selected stock (from your investment universe) meets your valuation criteria is 0.25. Given that a stock meets your valuation criteria, the probability that the stock meets your financial strength criteria is 0.40. What is the probability that a stock meets both your valuation and financial strength criteria?

9. A report from Fitch data service states the following two facts:24

• In 2002, the volume of defaulted U.S. high-yield debt was $109.8 billion. The average market size of the high-yield bond market during 2002 was $669.5 billion.

• The average recovery rate for defaulted U.S. high-yield bonds in 2002 (defined as average price one month after default) was $0.22 on the dollar.

Address the following three tasks:

A. On the basis of the first fact given above, calculate the default rate on U.S. high-yield debt in 2002. Interpret this default rate as a probability.

B. State the probability computed in Part A as an odds against default.

C. The quantity 1 minus the recovery rate given in the second fact above is the expected loss per $1 of principal value, given that default has occurred. Suppose you are told that an institution held a diversified high-yield bond portfolio in 2002. Using the information in both facts, what was the institution's expected loss in 2002, per $1 of principal value of the bond portfolio?

10. You are given the following probability distribution for the annual sales of ElStop Corporation: