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Determinants of Interest Rate for Individual Securities The Wall Street Journal reports that the rate on 3-year Treasury securities is 8.00 percent, and the 6-year Treasury rate is 8.20 percent. From discussions with your broker, you have determined that expected inflation premium is 3.35 percent next year, 2.95 percent in Year 2, and 3.70 percent in Year 3 and beyond. Further, you expect that real interest rates will be 4.00 percent annually for the foreseeable future. What is the maturity risk premium on the 6-year Treasury security? .
50%
1.25%
.85%
.30%
Evil Pop, Inc., has an average collection period of 54 days. Its average daily investment in receivables is $43,800. Assume 365 days per year. What is the receivables turnover? What are annual credit sales?
A trader buys a European call option and sells a European put option. The options have the same underlying asset, strike price, and maturity. Describe the trader’s position. Under what circumstances does the price of the call equal the price of the p..
Crosby Industries has a debt–equity ratio of 1.6. Its WACC is 12 percent, and its cost of debt is 9 percent. There is no corporate tax. What is the company’s cost of equity capital? What would the cost of equity be if the debt–equity ratio were 2?
What assumption is made about reinvestment of cash flows when using the yield to maturity?- What characteristics of a bond affect its reinvestment risk?
Mike was granted stock options on 1,000 shares of his employer's stock. The stock is currently selling for $27.70 a share and has a standard deviation of 36 percent. The option's strike price is $27.50 and the time to maturity is 10 years. What is th..
Suppose that put options on a stock with strike prices $45 and $55 cost $2 and $9, respectively. Use these options to create a bear spread. At what stock price at maturity will you break even? In other words, at what stock price, will you make $0 pro..
1. firm a has 10000 in assets entirely financed with equity. firm b also has 10000 in assets but these assets are
Each year, the Schreiber Corporation must determine how much to contribute to the company's pension plan. The company uses a ten-year planning horizon to determine the contribution which, if made annually in each of the next ten years, would allow fo..
Assume that the Rome Electricity Company (REC) wishes to create a sponsored ADR program worth $300 million to trade its shares on the New York Stock Exchange. Also assume that REC is currently selling on the Borsa Italiana (the Italian Stock Exchange..
report on a budget information problem.- Problem identification:- Analysis (investigation):- Conclusion to the analysis (results of the investigation):The solution, listed as a set of SMART recommendations:
The government's eminent domain powers allowing for a taking of land for a public use. What is meant by a public use? Is the taking of land for development of a shopping mall considered a public use? How did the U.S. Supreme Court analyze the notion ..
Determine the minimum-size screen, in square feet, required to handle the crusher output. If the screening unit is 4 ft wide, what will be the nominal screen sizes?
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