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Given the returns and probabilities for the three possible states listed here, calculate the covariance between the returns of Stock A and Stock B. For convenience, assume that the expected returns of Stock A and Stock B are 0.13 and 0.16, respectively. (Round your answer to 4 decimal places. For example .1244)
probability Return A Return B
Good 0.35 0.30 0.50
ok 0.50 0.10 0.10
poor 0.15 -0.25 -0.30
Suppose that at the present time, one can enter 5-year swaps that exchange LIBOR for 5%. An off-market swap would then be defined as a swap of LIBOR for a fixed rate other than 5%. For example, a firm with 10% coupon debt outstanding might like to co..
A company's 8% coupon rate, semi-annual payment, $1,000 par value bond that matures in 20 years sells at a price of $593.17. The company's federal-plus-state tax rate is 30%. What is the firm's after-tax component cost of debt for purposes of calcula..
Mr. Nailor invests $6,000 in a money market account at his local bank. He receives annual interest of 8% for 7 years. How much return will his investment earn during this time period? (Compound monthly)
The McDonnell Company has outstanding bonds with a coupon rate of 6.75% and semi-annual payments. The bonds are redeemable at their face value on December 30, 2032. If Weege can earn 5% on comparable investments and settle the transaction on March 24..
Red Shoe Co. has concluded that additional equity financing will be needed to expand operations and that the needed funds will be best obtained through a rights offering. It has correctly determined that as a result of the rights offering, the share ..
Calculate the expected return of portfolio
One company has two outstanding publicly traded bonds. The two bonds will both mature in ten years and have the same coupon rate. One of the bonds is convertible into common stock; the other one is not convertible. Which bond will have the higher yie..
Security F has an expected return of 10.9% and a standard deviation of 24% per year. Security G has an expected return of 18.1% and a standard deviation of 63% per year.
Mr. Smith signs a five-year endorsement deal with a prominent sponsor. Under this deal Hyun-Woo will receive $5,000 each year for the first three years and $6,500 each year for the final two years. What is the present value of the total deal if the p..
Sqeekers Co. issued 13-year bonds a year ago at a coupon rate of 7.9 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 6.2 percent, what is the current bond price?
The Clayton Manufacturing Company is considering an investment in a new automated inventory system for its warehouse that will provide cash savings to the firm over the next five years. The firm’s CFO anticipates additional earnings before interest, ..
The April 21, 2015 University Press reported that faculty salaries rose an average of 3.1% in the past year, but after adjusting for inflation, there was actually an average decrease of 0.3%. What was the rate of inflation?
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