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Risk is an important concept affecting security prices and rates of return. Risk is the chance that some unfavorable event will occur, and there is a trade-off between risk and return. The higher an investment’s risk, the equivalent Item 1 the return required to induce investors to purchase the asset. This relationship between risk and return indicates that investors are risk ---- :investors dislike risk and require--------- rates of return as an inducement to buy riskier securities. A--------- represents the additional compensation investors require for bearing risk; it is the difference between the expected rate of return on a given risky asset and that on a less risky asset. An asset’s risk can be considered in two ways: On a stand-alone basis and in a portfolio context.
Underestimated Inc.’s common shares currently sell for $40 each. The firm’s management believes that its shares should really sell for $47 each. What is the current cost of common equity for the firm? what is the cost of common stock for Whitewall?
Conduct Dupont Analysis to find ROE on Tesla Motors for the past three years (2012, 2013, 2014), showing calculations, then explain this data in comparison to General Motors. What improvements can TSLA make?
Gross profit is equal to
Could I Industries just paid a dividend of $1.05 per share. The dividends are expected to grow at a 20 percent rate for the next 6 years and then level off to a 5 percent growth rate indefinitely. If the required return is 13 percent, what is the val..
Suppose a European put has an exercise price of $110 on February 5. The put expires in 145 days. Suppose the appropriate discount rate on Treasury bills maturing in 44 days is 7.615. What is the max value of the European put? If the put were instead ..
Bronco Co. is a U.S.-based MNC that has subsidiaries in Spain and Germany. Both subsidiaries frequently remit their earnings back to the parent company. The Spain subsidiary generated a net outflow of €1,000,000 this year, while the German subsidiary..
Suppose Ford Motor Co. sold an issue of bonds with a 10-year maturity, $1,000 par value, and 10% coupon rate. Two years after the bonds were issued, the going rate of interest on similar bonds fell to 6%. At what price would the bonds sell? Instead o..
Why, or why not? How might you use social media marketing in the Marketplace Live simulation to build relationships with business buyers? Provide at least two specific examples and defend your choices.
Micro Spinoffs, Inc., issued 10-year debt a year ago at par value with a coupon rate of 8%, paid annually. Today, the debt is selling at $1,160. The firm’s tax bracket is 35%. Micro Spinoffs also has preferred stock outstanding. The stock pays a divi..
One of the following embedded options will decrease the required rate of return by bondholders if other factors are constant. What is it? (1) Bonds with call option (2) bonds with convertible option (3) straight bonds (4) bullet bonds
If a coupon bond and a zero-coupon bond both have the same yield and the same maturity, will they both have the same duration? If yes then explain why. If no then explain which one will have a lower duration and why?
Karen corporation issued preferred stock with par value $800.the stock promised to pay an annual dividend equal to 20% of the par value. if the appropriate discount rate for this stock is 11%,what is the value of the stock
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