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Financial intermediaries (FIs) can offer savers a safer, more liquid investment than a capital market security, even though the intermediary invests in risky illiquid instruments because
FIs can diversify away some of their risk.
FIs closely monitor the riskiness of their assets.
the federal government requires them to do so.
FIs can diversify away some of their risk and closely monitor the riskiness of their assets.
FIs can diversify away some of their risk and the federal government requires them to do so.
The debentures are callable two years from now at $1,090. If you require a 20 percent rate of return on investments of this perceived risk level, should you buy these debentures?
An engineer analyzing cost data discovered that the information for the first three years was missing. However, she knows that the cost in year four was $1250 and the cost continued to increase by 5% per year thereafter.
A stock has had returns of −19.1 percent, 29.1 percent, 25.2 percent, −10.2 percent, 34.9 percent, and 27.1 percent over the last six years. What are the arithmetic and geometric returns for the stock?
A six-year government bond makes annual coupon payments of 5% and offers a yield of 3% annually compounded. Suppose that one year later the bond yields 2% at the end of the year. What return would the bondholder earn in this case?
Vedder, Inc., has 6.1 million shares of common stock outstanding. The current share price is $61.10, and the book value per share is $4.10. Vedder also has two bond issues outstanding. Assume that the overall cost of debt is the weighted average of t..
The Great Lakes Co. has 12 percent coupon bonds making annual payments with a YTM of 9 percent. The current yield on these bonds is 9.8 percent. How many years do these bonds have until they mature?
Fluctuation in inflation can occur in the short or long term. For example, rice levels can increase and decrease on a month to month arsis and we can also evaluate inflation rates over time. Therefore, while it may be hard to redict the economic chan..
Junior Interiors market value capital structure of 62% Common Equity, 3% Preferred Stock (PS) and 35% Debt. The company does not pay dividends, and evaluates its operations as approximately 30% more risky than an “average” company in the industry. Wh..
Oriental is expected to pay an annual dividend of $2 per share forever. Investors require a return of 12% per year to compensate for the risk of not receiving the expected dividends. The firm’s share trade for $19 each. What is the value added by buy..
Southern Mfg., Inc., is currently operating at only 86 percent of fixed asset capacity. Current sales are $620,000. How fast can sales grow before any new fixed assets are needed?
You are developing a proposal to open three new mexican restaurants around the metro detroit area over the next four years. The Project requires a purchase of $800,000 of equipment with a four year useful life and a book value of zero at the end of t..
Speedy Auto Parts is considering a merger with Freeman Car Parts. Freeman's market-determined beta is 0.9, and the firm currently is financed with 20% debt, at an interest rate of 8%, and its tax rate is 25%. Calculate the current required return to ..
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