Analyst is evaluating securities in a developing nation

Assignment Help Financial Management
Reference no: EM131047533

An analyst is evaluating securities in a developing nation where the inflation rate is very high. As a result, the analyst has been warned not to ignore the cross-product between the real rate and inflation. If the real risk-free rate is 6.3% and inflation is expected to be 21.69% each of the next 4 years, what is the yield on a 4-year security with no maturity, default ,or liquidity risk? State your answer as a percent to 2 decimal places.

Reference no: EM131047533

Questions Cloud

Growth rate in earnings per share : 3 years ago, Weed Go Inc. earned $1.33 per share. Its earnings this year were $2.31. What was the growth rate in earnings per share (EPS) over the 3-year period? State your answer as a percentage to two decimal places (e.g. 16.38%). The % sign is not..
Expected rate of return on a stock with beta : Investors expect the market rate of return this year to be 20.00%. The expected rate of return on a stock with a beta of 1.4 is currently 28.00%. If the market return this year turns out to be 18.00%, how would you revise your expectation of the rate..
Purchase an investment that will generate annual cash flows : You have the opportunity to purchase an investment that will generate annual cash flows of $11,982 per year for the next 28 years. If your required rate of return on this investment is 23.45%, how much is the investment worth?
What is the future worth of each project : Tempura Inc. is considering two projects, and must do one of them. Project A requires an investment of $44,000. Estimated annual receipts for 20 years are $24,000; estimated annual costs are $12,500. What is the future worth of each project?
Analyst is evaluating securities in a developing nation : An analyst is evaluating securities in a developing nation where the inflation rate is very high. As a result, the analyst has been warned not to ignore the cross-product between the real rate and inflation. If the real risk-free rate is 6.3% and inf..
The liquidity premium on the corporate bond : A Treasury bond that matures in 8 years has a yield of 3.24%. A 8-year corporate bond has a yield of 7.8%. Assume that the liquidity premium on the corporate bond is 0.36%. What is the default risk premium on the corporate bond?
Credit card issuers must by law print annual percentage rate : Master Card and other credit card issuers must by law print the Annual Percentage Rate (APR) on their monthly statements. If the APR is stated to be 19.83%, with interest paid monthly, what is the card's EFF%? State your answer as a percentage to 2 d..
Best estimate of the stocks current market value : Acme Corporation just paid a dividend of D 1 = $1.72. Analysts expect the company's dividend to grow by 10% between year 1 and 2, and at a constant rate of 5% from year 2 to 3 and continue with the 5% thereafter. The required return on this low-risk ..
Straight-line to zero over the projects five-year life : Consider a project to supply 100 million postage stamps per year to the USPS for the next five years. You have an idle parcel of land available that cost $850,000 five years ago; if the land were sold today it would net you $1,080,000 after-tax. The ..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Long-term debt-what is the operating cash flow

In 2008 a firm has 2,550,000 in long-term debt, 760,000 in common stock and an addition to surpuls of 6,300,000. In 2009 the firm has long-term debt of 3,850,000, capital stock of 905,000 and an additional paid in surplus of 8,500,000, dividends paid..

  Evaluating project with the cash flows

RAK Corp. is evaluating a project with the following cash flows: Year Cash Flow 0 –$ 30,000 1 12,200 2 14,900 3 16,800 4 13,900 5 – 10,400 The company uses an interest rate of 8 percent on all of its projects. Calculate the MIRR of the project using ..

  What is the fair price of investment

An investment pays $2,100 per year for the first 3 years, $4,200 per year for the next 8 years, and $6,300 per year the following 12 years (all payments are at the end of each year). If the discount rate is 8.75% compounding quarterly, what is the fa..

  Calculate tammys total return on this investment

Tammy Jackson purchased 187 shares of All-American Manufacturing Company stock at $34.50 a share. One year later, she sold the stock for $43 a share. She paid her broker a $36 commission when she purchased the stock and a $45 commission when she sold..

  Accusoft systems offers business owners software package

The company "Accusoft Systems" offers business owners a software package that maintains the records of many accounting functions from sales bills through bank transactions. The site license costs $ 22,000 per installation concept and involves a fee o..

  All transaction-related costs

Grant purchased one call on XYZ stock at an exercise price of $25. The market price of XYZ stock when Grant purchased the call was $24 a share. XYZ is currently priced at $30 a share. Grant paid $120 to buy the call. How much profit will Grant make i..

  Common stock and preferred stock

Debt: 10,000 7.7 percent coupon bonds outstanding, $1,000 par value, 15 years to maturity, selling for 106 percent of par; the bonds make semiannual payments. Common stock: 490,000 shares outstanding, selling for $67 per share; the beta is 1.10.

  Find the nominal interest rate for a debt security

Find the nominal interest rate for a debt security given the following information: real rate = 2%, liquidity premium = 2%, default risk premium = 4%, maturity risk premium = 3%, and the inflation premium = 3%.

  Difference between normal goods and inferior goods

Discuss the difference between substitutes and complements and the difference between normal goods and inferior goods. How do managers and business owners use these concepts? Please provide real world examples.

  What is the projects discounted payback period

NPV Project K costs $52,125, its expected cash inflows are $12,000 per year for 8 years, and its WACC is 12%. What is the project’s NPV? Problem 11-5 What is the project’s discounted payback period?

  What is the required rate of return on the investors portfo

An investor is forming a portfolio by investing $55,000 in stock A that has a beta of 1.33, and $75,000 in stock B that has a beta of 0.95. The market risk premium is equal to 6.30% and Treasury bonds have a yield of 4.25%. What is the required rate ..

  What is the cost of equity for the corporation

The expected return on the market is 12%. The risk-free rate is 3.5%. The corporation has a current stock price of $65. There are 15 million shares outstanding. The beta for the stock is 1.6. What is the cost of equity for the corporation? What is bo..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd