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A share of stock with a beta of .76 now sells for $51. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 3%, and the market risk premium is 7%.
a. Suppose investors believe the stock will sell for $53 at year-end. Is the stock a good or bad buy? What will investors do?
The stock is a (Click to select)goodbad buy and the investors (Click to select)will investwill not invest.
b. At what price will the stock reach an “equilibrium” at which it is perceived as fairly priced today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Stock price $
eans ‘n More currently sells blue jeans and T-shirts. Management is considering adding fleece tops to their inventory to provide a cooler weather option. The tops would sell for $39 each and they expect to sell 6,000 per year. By adding the fleece to..
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Consider the following balance sheet (in millions) for an FI: Assets Liabilities Duration = 11 years $850 Duration = 2 years $740 Equity 110. What is the FI’s duration gap? What is the FI's interest rate risk exposure? How can the FI use futures and ..
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You figure that the total cost of college will be $100,000 per year 18 years from today. If your discount rate is 8% compounded annually, what is the present value today of four (4) years of college costs starting 18 years from today?
If CD, Inc., has a bond with a 5.25% coupon and a maturity of 20 years but which was lower rated, what would be its price relative to the XY, Inc., bond? Explain.
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