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Consider an income guarantee program with an income guarantee of $6,000 and a benefit reduction rate of 50%. A person can work up to 2,000 hours per year at $8 per hour.
a. Draw the person's budget constraint with the income guarantee.
b. Suppose that the income guarantee rises to $9,000 but with a 75% reduction rate. Draw the new budget constraint.
c. Which of these two income guarantee programs is more likely to discourage work? Explain.
Best Western has $1,000 face value bonds outstanding. These bonds pay interest semi-annually, mature in 10 years, and have a 5 percent coupon. The current price is quoted at 95.5. What is the YTM? %?
A firm has decided to borrow 500,000 on a 10% add on basis, payable in 6 end of the month installments. What would the nominal annual rate be on the loan be?
Managerial stock options are an incentive for managers to act in the best interest of:
A one-year bond offers a yield of 6% and a two year bond offers a yield of 7.5%. Under the expectations theory what should be the yield on a one year bond next year?
You own a call option on a stock and the strike price of the option is $30. The option has 3 weeks until expiration and the stock is currently priced at $35 per share. You paid $1 per put option and you bought 1 put option. What is the largest payout..
Assuming that the company’s overall beta is 1.2102. The risk-free rate is 5%, and the required rate of return on the market is 11%. You are considering a low-risk project whose market beta is 0.5 less than the company’s overall beta.
Not-for-profit health care organizations: What are revenues, gain, and other support? What are expenses and losses?
Moraine, Inc., has an issue of preferred stock outstanding that pays a $3.15 dividend every year in perpetuity. If this issue currently sells for $92 per share, what is the required return?
Devon lost his job as a logistics manager earning $65,000 a year when his former company downsized in 2011; however, he found a new job eight months later as a logistics supervisor for a small company in Jacksonville, Florida. Devon took a significan..
Atlantis Fisheries issues zero coupon bonds on the market at a price of $492 per bond. These are callable in 9 years at a call price of $550. Using semi annual compounding, what is the yield to call for these bonds?
Summit Systems will pay a dividend of $1.50 this year. If you expect Summit's dividend to grow by 6% per year, what is its price per share if its equity cost of capital is 11%?
The required return on the shares in the firms identified in parts (i) and (ii) is 15% per annum (discount rate). Calculate the current share price in each part. The current dividend per share in Firm B is 80 cnets. This dividend is expected to grow ..
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