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Hilltop Garage pays a constant annual dividend. One year ago, when you purchased shares of that stock at $12 a share, the dividend yield was 2 percent. Over this past year, the inflation rate has been 2.6 percent. Today, the required return on this stock is 8 percent and you just sold all of your shares. What is your total nominal return on this investment? (Please explain)
Great Wall Pizzeria issued 8-year bonds one year ago at a coupon rate of 6.1 percent. If the YTM on these bonds is 7.5 percent, what is the current bond price?
What is the accumulated sum of the following stream of payments 2849 every year at the end of the year for 11 years at 9.04 percent compounded annually?
_________ take positions in financial futures to reduce their exposure to future movements in interest rates or stock prices; ________ commonly take the opposite position and thus serve as counterparties on many transactions.
Suppose that an I-bank is offering the exact same forward as (b) but with a rate strictly lower than the rate that you found in (b). Find an arbitrage implementation to capitalize on the arbitrage opportunity for a long position of the forward.
The implementation of capital budgeting projects that have a rate of return higher than the firm's "weighted average cost of capital" will decrease the value of the firm.
Stock Y has a beta of 1.3 and an expected return of 18.5%. Stock Z has a beta of 0.70 and an expected return of 12.1%. If the risk-free rate is 8% and the market risk premium is 7.5%, are these stocks correctly priced? If not, what would the risk-fre..
The real risk-free rate is 4%. Inflation is expected to be 2% this year and 4% the next two year. Assume that the maturity risk premium is zero. What is the yield on 2-year Treasury securities? What is the yield on 3-year Treasury securities?
The company's policy is toadjust the corporate cost of capital up or down by 3 percentage points to account for differential risk. Is the project financially attractive?
We are now in 2015 and interest rates are still very low. There are plenty of analysts and industry professionals who argue this has not been the correct approach. Obviously, the Fed has disagreed. Do you agree or disagree with the Fed that keeping r..
Which of the following is NOT accurate regarding evaluating NPV estimates and break-even analysis?
Find the hedge ratio for a call option on £10,000 with a strike price of €15,000. The current exchange rate is €1.50/£1.00 and in the next period the exchange rate can increase to €2.40/£ or decrease to €0.9375/£. The current interest rates are i€ = ..
Both Bond Sam and Bond Dave have 6 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has three years to maturity, whereas Bond Dave has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the per..
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