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A researcher has determined that a two-factor model is appropriate to determine the return on a stock. The factors are the percentage change in GNP and an interest rate. GNP is expected to grow by 4.5 percent, and the interest rate is expected to be 4 percent. A stock has a beta of 2.2 on the percentage change in GNP and a beta of –.84 on the interest rate.
If the expected rate of return on the stock is 13 percent, what is the revised expected return on the stock if GNP actually grows by 4.1 percent and the interest rate is 4.3 percent? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Revised expected return %
Teresa bought a corporate bond with the time to maturity of 10 years, yield to maturity of 8%, and face value of $1,000. It pays semiannual coupons and the coupon rate of 8%. Was the bond sold at a premium, discount, or par? Calculate and explain in ..
Given are the following data for Golf Corporation: Market price/share = $12; Book value/share = $10; Number of shares outstanding = 100 million; Market price/bond = $800; Face value/bond = $1,000; Number of bonds outstanding = 1 million. Calculate th..
Briefly state and discuss the three forms of the efficient market hypothesis (EMH). What is the main implication that comes out of all forms of the EMH?
Assume that a $1,000,000 par value, semiannual coupon U.S. Treasury note with three years to maturity (TM) has a coupon rate of 5%. The yield of the bond is 7.70%. Using this information and ignoring the other costs involved, calculate the value of t..
In the even of an unexpected and severe drain on deposits in the next 3 days, and 10 days, the depository institution will liquidate assets in the following manner: Calculate the 3 and 10 day liquidity index for the depository institution.
Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 500 payments a day will be made to lock boxes with an average payment size of $2,500. If the lock box makes the cash availabl..
What is behavioral finance? How is it related to behavioral economics?- What do economists mean when they describe investors as behaving rationally?
In a small open economy, how would Taxes on businesses are expected to be increased in the future events affect the equilibrium interest rate?
Assume you are the Chief Financial Officer at Porter Memorial Hospital. The CEO has asked you to analyze two proposed capital investments - Project X & Project Y. Each project has a net investment outlay of $10,000 and the opportunity cost for each p..
Increased needs for net working capital are:
Determine the price of an average price Asian call option. Use an exercise price of 95.- Count the current price in determining the average.
If Milton stretches its accounts payable an extra 10 days beyond the due date next year, how much additional short-term funds (that is, trade credit) will be generated?
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