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EXPECTATIONS THEORY - Assume that the real risk-free rate is 2% and that the maturity risk premium is zero. If a 1-year Treasury bond yield is 5% and a 2-year Treasury bond yields 7%, what is the 1-year interest rate that is expected for Year 2? Calculate this yield using a geometric average. What inflation rate is expected during Year 2? Comment on why the average interest rate during the 2-year period differs from the 1-year interest rate expected for Year 2.
Evaluate the net present value of a stream of income:
“Time is money.” We have all heard this cliché at some point. Now that you have studied the time value of money concept, explain (3–5 paragraphs) how this simple phrase illustrates the time value notion.
What is the required rate of return if the market risk premium increased to 20% because of the increase in investors' risk aversion assuming that the return on the risk-free asset remains the same as in question 2 above.
Kennedy Air Services is now in the final year of a project. The equipment originally cost $22 million, of which 75% has been depreciated. Kennedy can sell the used equipment today for $5.5 million, and its tax rate is 40%. What is the equipment's aft..
Assume that FCF will continue to grow at the growth rate for the last year in the forecast horizon. What is the horizon value at 2017? What is the present value of the horizon value? What is the present value of the forecasted FCF? What is the curren..
what is the financial conditionds of the casino industry and What financial opportunities do exist in the casino industry
Abe Forrester and three of his friends from college have interested a group of venture capitalists in backing their business idea. The proposed operation would consist of a series of retail outlets to distribute and service a full line of vacuum clea..
The Smiths want to buy a 2014 Nissan Altima for $25,230. Bank of America will charge them a 5.35% annual rate compounded monthly for a 5-year loan. How much would the Smiths need for a down payment? Prepare a loan amortization table showing principal..
International companies face multiple types of risk related to international finance. Discuss the impact of the following types of risk on a multinational company:
Distinguish between the types of bonds. What factors determine their value? Explain three important relationships that exist in bond valuation. Distinguish between preferred stock and common stock. Compare valuing preferred stock and common stock.
The company also expects its inventory investment to decrease by $1 million due to the anticipated decrease in sales. Determine the net effect of this plan on Blawnox's pretax profits.
You own a portfolio that has $2,500 invested in Stock A and $3,500 invested in Stock B. If the expected returns on these stocks are 10 percent and 16 percent, respectively, what is the expected return on the portfolio?
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