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As a long-time investment expert, you have come to firmly believe in the following rules: 1. If a person is age thirty-five or younger, and is married, then he or she should invest in securities. 2. If a person has less than $20,000 to invest and is looking for long-term return, then he or she should invest in multiple stocks. 3. If a person wants to invest in growth stocks or has an annual income of at least $50,000, then he or she should invest in Macrosoft stock. 4. If a person seeks long-term return, and wants to invest in multiple stocks, then he or she should invest in growth stocks. 5. If a person has less than $20,000 to invest and wants to invest in securities, or if he or she has an annual income of at least $50,000, then he or she should invest in growth stocks. 6. If a person is married, then he or she should look for long-term return. A. Identify all the underlying conditions/actions and give each a short name. For example: • A = Person’s Age is 35 or less • M = Person is Married • S = Invest in Securities B. Translate each of the given 6 rules into a graphic formula using the above abbreviated names and arrows. Show “If X, then Y” and “If X and Y, then Z”, respectively, as: X X Y Z Y C. Integrate the above graphic fragments into a single diagram showing all the conditions/actions and all the rules. It may take several trials to create a neat, elegant diagram. If the diagram becomes too messy and unreadable, rearrange the items to eliminate crossed lines. Use the drawing toolbar (Insert/Shapes) in MS-Word to draw the arrows. D. An investor approaches you to seek advice on investing in Macrosoft stock. She is married and has $15,000 to invest. Use the above diagram to figure out what advice you would offer her. Clearly explain your thinking process.
If we solve the dividend growth model presented in the text for total return, we find that total return is comprised of
Bennington Industrial Machines issued 139,000 zero coupon bonds four years ago. The bonds originally had 30 years to maturity with a yield to maturity of 6.9 percent. What is the price of the bonds? What is the market value of the company's debt?
Calculate the expected return - The standard deviation and The variance
Assume the rate on the issuance of $100m of 100-year bonds is 7.5%; the annual debt service payment would be $7.505m. How high would the interest rate have to be on 30-year bonds for the annual debt service payment to be the same for both financings?
Argosy Associates, a U. S.-based investment partnership, borrows €80,000,000 at a time when the exchange rate is $1.2/€. What is the effective dollar cost of this loan if you hedge all payments in the forward market? Assume zero fees!
Assume that interest rates on 20-year Treasury and corporate bonds with different ratings, all of which are noncallable, are as follows: T-bond = 7.72% A = 9.64% AAA = 8.72% BBB = 10.18% A. Real risk-free rate differences B. Tax effects. C. Maturity ..
Suppose a stock had an initial price of $80 per share, paid a dividend of $.60 per share during the year, and had an ending share price of $72. Compute the percentage total return. What were the dividend yield and the capital gains yield?
Tall trees inc is using the Internal Rate of Return The IRR when evaluating projects. You have to find the IRR for the companys project. The initial outlay for the project is $450,000. The project will produce the following after tax cash inflows of
Last week, the local newspaper mortgage rate column reported that the rate for a 30- year fixed rate mortgage was 3.88 percent, while for a 7 year balloon payment mortgage was 3.45 percent. what other factors should the dumonts consider when choosing..
A company is purchasing a new machine which will cost $130,000 with additional shipping costs of $5,000 and set up and installation costs of $12,000. An additional $8,000 in Net Working Capital will be required. Calculate the Initial Outlay (startup ..
Treasury bills outperformed inflation every year during the period 1925-2012. Small-company stocks outperformed large-company stocks every year during the period 1925-2012. On an annual basis, small-company stocks had more consistent rates of return ..
Which of the following is not a true statement about mutual funds?
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