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A company's 5-year bonds are yielding 9.15% per year. Treasury bonds with the same maturity are yielding 6.55% per year, and the real risk-free rate (r*) is 2.45%. The average inflation premium is 3.7%, and the maturity risk premium is estimated to be 0.1(t - 1)%, where t = number of years to maturity. If the liquidity premium is 0.65%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places.
An investor earns dividends of $450 during the course of the year. At the end of the year, the stock is worth $10,700. The capital-gains yield on the stock was 8 percent. At the beginning of the year, the stock was worth?
The great, great grandparents of one of your classmates sold their factory to the government 104 years ago for $150,000. If these proceeds had been invested at 6%, how much would this legacy be worth today? Assume annual compounding.
You have identified the following information for the competitors of a firm that you are analyzing. Given that the firm has 100M shares outstanding how much should it be worth in the market?
How will “you” allocate $50k between stocks and bonds? Justify your decision. Note: There’s no optimal magical allocation for everyone because it’s subject to your individual situation/goal. If Federal Reserve increases the Fed Funds rate, will the l..
What is the expected risk- free rate of return if asset X, with a beta of 1.5, has an expected return of 20 percent, and the expected market return is 15 percent? Can please explain step by step how to solve this problem.
The current price of a stock is $94 and 3 month call options with a strike price of $95 currently sell for $4.70 (for one option). An investor who feels that the price of the stock will increase is trying to decide between two strategies: What is the..
Stock A has the following returns for various states of the economy: State of the Economy Probability for Stock Ws Return
In what instances would an investor want to "best the market" and "hold the market"? Discuss the strategies for each and their dependence on an investor's information and trading skills.
Your firm must purchase a new machine. It will cost $120,000 and last 10 years, at which time it will have salvage value of $16,000. Annual O&M costs will be $7,000 per year for all 10 years. The annual equivalent (AE) cost of owning this machine is ..
Identify all the important stakeholders for the entity.
A six-month Twitter call option with an exercise price of $50.00 was traded at $4.25 per option on February 27, 2015. Assume that the risk free rate was 1.2% per year and stock price for Twitter on February 27, 2015 was $48.08. Twitter Inc. does not ..
If the required reserve is 0.2, the level of deposits is $1,000, the level of currency held by the public is $100, the level of excess reserves is $100, the level of MMF is $1,000 and the level of time deposits is $2,000, then M2 is: Ceteris paribus,..
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