Find the appropriate risk-free rate

Assignment Help Financial Management
Reference no: EM131313053

Consider an option that expires in 72 days. The bid and ask discounts on the T-bill are 7.44 and 7.20, respectively. Find the appropriate risk-free rate. For $100 1-yr T-bill.

Reference no: EM131313053

Questions Cloud

Analyzing a proposed project : The Meldrum Co. is analyzing a proposed project. The company expects to sell 3,000 units, give or take 15 percent. The expected variable cost per unit is $8 and the expected fixed costs are $12,500. Cost estimates are considered accurate within a plu..
Calculate the free cash flows for each of the three years : The XYZ company is forecasting that it will generate EBIT of $30K, $40K and $50K in each of the next 3 years. Depreciation is expected to be $3K; $3.5K and $4K in each of the years of the EBIT forecast. Calculate the free cash flows for each of the t..
What is the npv of the new video game : M.V.P. Games, Inc., has hired you to perform a feasibility study of a new video game that requires an initial investment of $7.9 million. M.V.P. expects a total annual operating cash flow of $1.39 million for the next 10 years. What is the NPV of the..
What are the best-case and worst-case npvs : McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $850 per set and have a variable cost of $450 per set. The company has spent $155,000 for a marketing study that determined the company will sell 59,000 sets per year ..
Find the appropriate risk-free rate : Consider an option that expires in 72 days. The bid and ask discounts on the T-bill are 7.44 and 7.20, respectively. Find the appropriate risk-free rate. For $100 1-yr T-bill.
Capital budgeting for net present value : Describe the role a company’s cost of capital plays in capital budgeting for both net present value (NPV) and internal rate of return (IRR) calculations. What are the rules for capital budgeting decisions that are made based on NPV and IRR. Explain h..
What is the present worth of each project : Tempura, Inc., is considering two projects. Project A requires an investment of $34,000. Estimated annual receipts for 20 years are $20,000; estimated annual costs are $12,500. What is the present worth of each project?
Which alternative should be recommended : Xanadu Mining is considering three mutually exclusive alternatives, as shown in the table below. MARR is 7.5 % year. What is the present worth of each alternative? Which alternative should be recommended?
Entertainment expense accounts to property development : Mr. Coleman has asked Ms. Grider to change the names of the Travel and Entertainment Expense accounts to Property Development. He hopes to deflect his father's attention away from the amount he has spent on travel and entertainment until he has prove..

Reviews

Write a Review

Financial Management Questions & Answers

  Baked-goods plant

Ethics - You are the CEO of a baked-goods plant located in the South Bronx. You have gotten into the doughnut business and your marketing Vice President suggests using a brand name that suggests that the doughnuts are made in the old fashioned way.

  The market porfolio and the risk-free asset

You are given the following information concerning three portfolios, the market porfolio, and the risk-free asset: Portfolio X 12% Rp 29% Op 1.25 Bp Portfolio Y 11% Rp 24% Op 1.10% Bp Portfolio Z 8% Op 14% Op .75 Bp Market 10 Rp 19 Op 1.00 Bp Risk-fr..

  What is portfolios expected return and standard deviation

Irene Adler is considering investing in the common stock of Holmes and Watson. If she invests 60% of her funds in Holmes and 40% in Watson, and if the correlation of returns between these two securities is 0.45, what is the portfolio’s expected retur..

  How much potential value would the firm lose

A firm is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. The CEO wants to use the IRR criterion, while the CFO favors the NPV method. You were hired to advise ..

  Present value of pipelines dollar amount of cash flows

Ahmad Oil Refinery, Inc. owns an  crude oil pipeline. The current production of oil is at the rate of 100 million barrels a year. The current price of crude oil is about $100 a barrel and is rising at the rate of 5% per year forever. Oil reserves are..

  Cause dividends per share to fluctuate the most

Which of the following dividend policies will cause dividends per share to fluctuate the most?

  Structure of risk-free interest rates is flat

Suppose that the term structure of risk-free interest rates is flat in the United States and Australia. The USD interest rate is 7% per annum and the AUD rate is 9% per annum. Payments are exchanged every year, with one exchange having just taken pla..

  Required return on the market portfolio

The risk-free rate is 3.6% and the required return on the market portfolio is 11.8%. A company that has just paid $1.80 per share in annual dividends has a beta of 0.9 and long-term growth rate of 5.2%. The dollar value of this stock is

  Assume the role of the social worker

Now, assume the role of the social worker. After viewing the video, create a journal entry addressing the following: Bias: Do you think the social worker fairly addressed his client’s concerns, without bias or discrimination? What Would You Do: How w..

  Analyze the impact of business transactions on accounts

Construct and use a trial balance.- Analyze the impact of business transactions on accounts.- Record given transactions directly in the T-accounts without using a journal. Use the letters to identify the transactions.

  If the nominal rate of return on corporate bond

If the nominal rate of return on a corporate bond is 11%, the pure rate is 3% and the risk premium is 4%, what is the inflation premium) multiplicative form) on this bond?  Which of the following ratios would be most useful in evaluating the profitab..

  How does corporate finance differ from personal finance

What do you know about finance? Why should everyone learn more about finance? How does corporate finance differ from personal finance? How are they similar?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd