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Assume that you inherited some money. A friend of your is working as an unpaid intern at a local brokerage firm, and her boss is selling securities each of which calls for the following 4 payments: $50 at the end of each of the next 3 years, plus a payment of $1,050 at the end of Year 4. Your friend says she can get you each of these securities at a price of $900. Your money is now invested in a bank that pays an 8 percent nominal (quoted) interest rate, but with quarterly compounding. You regard the securities as being just as safe, and as liquid, as your bank deposit, so your required effective annual rate of return on the securities is the same as that on your bank deposit. You must calculate the value of the securities to decide whether they are a good investment. What is their present value to you?
You will receive 2,500 in bonuses each year for the next three years (at the end of each year). You are hoping to use these bonuses for a car down payment in about ten years. At a 7.79% discount rate, how much will you have saved? (Round to two decim..
Landmark Coal operates a mine. During July, the company obtained 500 tons of ore, which yielded 250 pounds of gold and 63,100 pounds of copper. The joint cost related to the operation was $500,000. Gold sells for $325 per ounce and copper sells for $..
Suppose that a corporate bond with a Baa credit rating and five years to maturity has a yield to maturity of 8 percent. Suppose that the government of the city of Udwellum, which has a Baa credit rating, issues a bond with the dame time to maturity i..
Here are the data on $1000 par value bonds issued by Microsoft, GE Capital, and Morgan Stanley at the end of 2012. Assume you are thinking about buying these bonds as of January 2013. How would the value of the bonds change if (1) your required rate ..
A limit order to buy: is executed only if the purchase price is less than the limit amount. guarantees the purchase price but not the order execution. guarantees the quantity purchased but not the price. guarantees both the purchase price and the ord..
Stock Y has a beta of 1.4 and an expected return of 17.0 percent. Stock Z has a beta of 0.7 and an expected return of 10.1 percent. If the risk-free rate is 6.0 percent and the market risk premium is 7.2 percent, the reward-to-risk ratios for stocks ..
Decision-Tree Analysis The Karns Oil Company is deciding whether to drill for oil on a tract of land the company owns. The company estimates the project would cost $8 million today. Karns estimates that, once drilled, the oil will generate positive n..
Henderson Office Supply is considering a more liberal credit policy to increase sales, but expects that 9 percent of the new accounts will be uncollectible. What is the level of accounts receivable to support this sales expansion? What would be Hende..
Trahan Lumber Company hired you to help estimate its cost of common equity. You obtained the following data: D1 = $1.25; P0 = $27.50; g = 5.00% (constant); and F = 6.00%. What is the cost of equity raised by selling new common stock?
Calculate the current ratio and the profit margin for Ford and what are the major 3 components associated with Ford's profitability for cars and trucks?
The shares Bond Index fund (TLT) has a mean and annual standard deviation of returns of 7% and 10%, respectively. What is the 66% confidence interval for the returns on TLT?
Drongo Corporation's 3-year bonds yield 5.22%. The real risk-free rate is 2.21%. The maturity risk premium is estimated to be 0.07%(t-1), where t is equal to the time to maturity. The default and liquidity premiums for Drongo's bonds total 1% and are..
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