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A mutual fund has 450 shares of General Electric, currently trading at $17, and 450 shares of Microsoft, Inc., currently trading at $25. The fund has 1,000 shares outstanding.
A. What is the NAV of the fund?
B. If investors expect the price of General Electric to increase to $20 and the price of Microsoft to decline to $14 by the end of the year, what is the expected NAV at the end of the year?
C. Assume that the price of General Electric shares is realized at $20. What is the maximum price to which Microsoft can decline and still maintain the NAV as estimated in (a)?
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The corporate investors require an after-tax return on the preferred that exceeds their after-tax return on the bonds by 1.0%, which would represent an after-tax risk premium.
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Discuss whether each of the following types of loans can be easily securitized. Explain why or why not. a. Residential mortgages b. Small business loans c. Pools of credit card loans d. Pools of home equity loans e. Loans to farmers for production
Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 12 years to maturity that is quoted at 90 percent of face value. The issue makes semiannual payments and has an embedded cost of 11 percent annually. Re..
One-year bonds yield 7%, two-year bonds yield 8%, three-year bonds and greater maturity bonds all yield 9%. You are choosing between one-, two-, and three-year maturity bonds all paying annual coupons of 8%, once a year. Which bond should you buy if ..
Central bank directly controls both inside and outside money. Outside money is that part of the money supply produced by the private banking system. Inside money refers to the quantity of notes and coin in the economy.
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