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The expected return and standard deviation of returns of General Mills common stock over the next year are estimated to be 20 percent and 12 percent, respectively. Assume that the returns are approximately normally distributed.
a. Determine the probability of incurring a loss (negative rate of return) from investing in this stock.
b. Determine the probability of earning a rate of return less than the risk-free rate of 6 percent.
A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.3%. What is the standard devia..
You are considering two bonds. Both have semi-annual, 8 percent coupons, $1,000 face values, and yields to maturity of 7.5 percent. Bond S matures in 4 years and Bond L matures in 8 years. What is the difference in the current prices of these bonds?
If the firm you work for has a WACC of 8%. You have the ability to accept or decline a project that costs $50,000 initially, producing cash flows of $10,000 a year for three years after that, and then $8,000 for five years after that. Would it be in ..
It is now Januery 1, 2010 and Bill Nilas is considering the purchase of an outstanding $1,000 par bond that was issued on Januery 1, 2006. It has a 6 percent annual coupon and had a 10-year original maturity. It has 5 years of call protection (from t..
Define cash and cash equivalent in the context of accounting. For one specific organization, indicate the examples of items that should be included and excluded?
Juliet’s Children’s Clothes Company (JCCC) has a target profit of $100,000. That profit requires unit sales to be 2,000. JCCC’s variable cost per unit is $100 and fixed expenses are $50,000. If JCCC achieves that target profit, what is the margin of ..
You have a treasury bond that pays $100 one year from today and $1,100 two years from today. You notice that the yield-to-maturity on a one year-zero coupon treasury bond is 1% and the yield-to-maturity on a two year-zero coupon treasury bond is 2%. ..
Describe in detail the differences and similarities in calculating the present value and future value of a lump sum, annuity, perpetuity and A series of unequal (multiple) cash flows.
You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 18 million. The cash flows from the project would be sf 5.5 million per year for the next five years. Use the approximate ..
You are planning to buy a house appraised for $350,000 and finance it through a mortgage of $250,000. You would then have a loan-to-value ratio of 0.714, safely below the cutoff by your lender of 0.80. What is the amount that you will pay per month i..
MVP, Inc., has produced rodeo supplies for over 20 years. The company currently has a debt–equity ratio of 50 percent and is in the 40 percent tax bracket. The required return on the firm’s levered equity is 14 percent. The company would also make y..
You buy a $ 10, 000 term life insurance policy. Under a 20-year term life policy, if you die within a twenty-year period from issuance the policy will pay. According to the life tables 95377 of 98437 20 year olds live to be 40. What should you expect..
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