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An FI is planning the purchase of a $4 million loan to rise the average duration of its assets from 3.5 to 5.0 years. The FI currently has total assets worth $20 million, with $4 million in cash (duration of zero) and $16 million in loans.
A) Assuming the bank uses the cash to purchase the loan, should the bank purchase the loan if its duration is 8 years?
B) What duration loan should the FI purchase to obtain asset duration of 5?
Stock Y has a beta of 1.2 and an expected return of 14.5 percent. Stock Z has a beta of 0.7 and an expected return of 9.3 percent. If the risk-free rate is 5.6 percent and the market risk premium is 6.6 percent, the reward-to-risk ratios for stocks Y..
If rates in the market fall between now and one month from now, the mortgage banker:
The parents of a girl are planning to finance her college education. They want to make 48 quarterly deposits (equal amounts) in an account, which pays interest at 9% compounded monthly. What is the size of each quarterly deposit?
Moonlight Bay Inn is incorporated on January 2, 2010, by its three owners, each of whom contributes $20,000 in cash in exchange for shares of stock in the business. In addition to the sale of stock, the following transactions are entered into during ..
You are evaluating two different silicon wafer milling machines. The Techron I costs $213,000, has a three-year life, and has pretax operating costs of $54,000 per year. The Techron II costs $375,000, has a five-year life, and has pretax operating co..
The December 31, 2013, balance sheet of Schism, Inc., showed long-term debt of $1,405,000, $141,000 in the common stock account and $2,660,000 in the additional paid-in surplus account. What was the firm’s operating cash flow during 2014?
A project has a 0.76 chance of doubling your investment in a year and a 0.24 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment?
The Heuser Company's currently outstanding bonds have a 9% coupon and a 14% yield to maturity. Heuser believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 40%, what is Heuser's after-tax..
Your firm has an average receipt size of $130. A bank has approached you concerning a lockbox service that will decrease your total collection time by two days. You typically receive 7,200 checks per day. What is the NPV of accepting the lockbox agre..
The finance industry is in the midst of a transformative period of evolution, and financial economists have a huge agenda to tackle. Capital Marketing Theory and the Efficient Market Hypothesis are two common concepts used to describe the relationshi..
Todd O’Hanlon has worked in the management services division of Focus Consultants for the past five years. He currently earns an annual salary of about $120,000. At 33, he’s still a bachelor and has accumulated about $100,000 in savings over the past..
NU YU announced today that it will begin paying annual dividends. The first dividend will be paid next year in the amount of $0.63 a share. The following dividends will be $0.68, $0.83, and $1.13 a share annually for the following three years, respec..
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