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Reward-to-Risk Ratios
Stock Y has a beta of 1.45 and an expected return of 16.3 percent. Stock Z has a beta of 0.9 and an expected return of 12.6 percent.
Required:
If the risk-free rate is 5.4 percent and the market risk premium is 7.9 percent, are these stocks correctly priced?
Stock Y (overvalued or undervalued)
Stock Z (overvalued or undervalued)
The relationship between NPV and IRR is such that:
An investment has an installed cost of $526,800. The cash flows over the four-year life of the investment are projected to be $222,850, $239,450, $206,110, and $154,820. If the discount rate is infinite, what is the NPV? At what discount rate is the ..
The optimal portfolio:
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On January 8, 2016, a bank wants to lock in the 3-month interest rate starting on June 20, 2017. Currently, 6/2017 Eurodollar futures price is 94.93 and 9/2017 Eudollar futures price is 97.55. What is the interest rate that the bank can lock in? (Mar..
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Which one of the following is a correct value to use if you are conducting a best-case scenario analysis? Sales price that is most likely to occur, Lowest expected level of sales quantity, Lowest expected salvage value
Kendra Brown is analyzing the capital requirements for Reynolds Corporation for next year. Kendra forecasts that Reynolds will need $25 million to fund all of its positive-NPV projects, its shareholders expect the dividend to remain constant for the..
For the past three years, Wayne has been the sole owner and CEO of a corp that manufactures and distributes a relatively expensive high-tech baby monitoring device known as "Hear All." The business has grown steadily, and Wayne is convinced that it's..
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Debt: 10,000 6% coupon bonds outstanding, $1,000 par value, 10 years to maturity, selling at par, quarterly payment. Comment stock: 500,000 shares outstanding, selling for $25 per share, the beta is 1.2. Preferred stock: 15,000 shares of 5 percent pr..
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