### Annualized interest rate in financial decisions

Assignment Help Financial Management
##### Reference no: EM132014699

1. What is the correct way to annualize an interest rate in financial decisions?

2. John is watching an old game show on rerun television called Let’s Make a Deal in which you have to choose a prize behind one of two curtains. Behind one of the curtains is a gag prize worth \$ 150, and behind the other is a round-the-world trip worth \$7,200. The game show has placed a subliminal message on the curtain containing the gag prize, which makes the probability of choosing the gag prize equal to 75 percent. What is the expected value of the selection, and what is the standard deviation of that selection?

3. Zippy Corporation just sold \$30 million of convertible bonds with a conversion ratio of 40. Each \$1,000 bond is convertible into 25 shares of Zippy’s stock.

a. What is the conversion price of Zippy’s stock?

b. If the current price of Zippy’s stock is \$15 and the Company’s annual stock return is normally distributed with a standard deviation of \$5, what is the probability that investors will find it attractive to convert the bond into Zippy stock in the next year?

### Write a Review

#### Result in a bond with the greatest price volatility

Which of the following set of conditions will result in a bond with the greatest price volatility?

#### What is the common stock for year 2

If the preferred stock is cumulative, determine the total amount of cash dividends paid to each class of stock in each of the three years. What is the Common Stock for year 2?

#### What would be your investment strategy

Suppose that the six-month spot rate is 6.00% and one-year spot rate is 6.10%. Additionally, suppose that you can look into a crystal ball and know for sure that six months from now that the six-month forward rate will be 6.2%. What would be your inv..

#### Find present values of these ordinary annuities

Find the present values of these ordinary annuities. Discounting occurs once a year.

#### Bond in order to meet the investor desired percent return

How many years (at most) must be left before maturity on this bond in order to meet the investor’s desired percent return?

#### Voting blocks of equal size-low-middle and high income

Suppose we have a society where there are three voting blocks of equal size: low, middle, and high income.

#### How long will it take to accumulate given amount

if you deposit \$10,000 every year into an account paying 5% compounded annually, how long will it take to accumulate \$1,000,000?

#### Prepare jack and jills tax return and schedules

Prepare Jack and Jill's tax return Form 1040 and Schedules A, B, C, D, and SE for the current year.

#### Calculate the standard deviation for each stock

Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Recession .22 .10 − .17 Normal .52 .13 .12 Boom .26 .18 .29 Calculate the expected return for each stock. (Do not round intermediate calculations. Calcula..

#### Expects earnings and dividends to grow at a rate

McGaha Enterprises expects earnings and dividends to grow at a rate of 25% for the next 4 years, after the growth rate in earnings and dividends will fall to zero, i.e., g = 0. The company's last dividend, D0, was \$1.25, its beta is 1.20, the market ..

#### What is the firms earnings growth rate

The newspaper reported last week that Bennington Enterprises earned \$34 million this year. The report also stated that the firm’s return on equity is 16 percent. Bennington retains 80 percent of its earnings. What is the firm's earnings growth rate? ..

#### How would you evaluate their performance

Imagine you have been tasked with evaluating a portfolio manager. How would you evaluate their performance?