You manage an equity fund with an expected risk premium of 12% and a standard deviation of 34%. The rate on Treasury bills is 6.4%. Your client chooses to invest $80,000 of her portfolio in your equity fund and $120,000 in a T-bill money market fund...
|
Suppose a call option has an exercise price of $35, and the underlying stock is trading for $30. The cost of the option is $2, and the option expires in one month. A month later, the option stock is trading for $41. Assuming the investor exercises th..
|
Calculate the company's return on equity and explain whether the managers are providing a good return on the capital provided by the company's shareholders. Diagram and explain the operating cycle of a service company.
|
You have $100,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 15% and Stock Y with an expected return of 10%
|
Killer Whale, Inc. has the following balance sheet statement items: total current liabilities of $885,517; net fixed and other assets of $1,698,610; total assets of $2,852,030; and long-term debt of $655,703. What is the amount of the firm’s current ..
|
A stock is trading at $75 per share. The stock is expected to have a year-end dividend of $2 per share (D1 = $2), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 15% (assume the market is in ..
|
The portfolio manager of a tax-exempt fund is considering investing $500,000 in a debt instrument that pays an annual interest rate of 5.7% for four years (annual compounding). Suppose that the portfolio manager in part a has the opportunity to inves..
|
Liquidity planning requires monitoring deposit outflows. In each of the following situations, which of the outflows are discretionary and which are not? If the outflow is not discretionary, is it predictable or unexpected? a. In April, a farmer draws..
|
What annual rate of return is earned on a $2000 investment made in year 3 when it grows to $3000 by the end of year six? What's the current yield of a 4.5% coupon corporate bond quoted at a price of 102.08?
|
Your firm needs a machine which costs $250,000, and requires $40,000 in maintenance for each year of its 3 year life. After 3 years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 35% ..
|
Genetic Insights Co. purchases an asset for $17,234. This asset qualifies as a seven-year recovery asset under MACRS. The seven-year fixed depreciation percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, r..
|
A new alloy can be produced by process A. which costs $200,000. The operating cost will be $10,000 per quarter with a salvage value of $25,000 after its two-year life. Process B will have a first cost of $250,000, an operating cost of $15,000 per qua..
|