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Suppose that, holding yield constant, investors are indifferent as to whether they hold bonds issued by the federal government or bonds issued by state and local governments (that is, they consider the bonds the same with respect to default risk, information costs, and liquidity).
Suppose that state governments have issued perpetuities (or consols) with $75 coupons and that the federal government has also issued perpetuities with $75 coupons.
If the state and federal perpetuities both have after-tax yields of 8%, what are their pre-tax yields? (Assume that the relevant federal income tax rate is 39.6%.)
What is the present value of the following uneven cash flow stream −$50, $100, $75, and $50 at the end of Years 0 through 3? The appropriate interest rate is 10%, compounded annually. Suppose that on January 1 you deposit $100 in an account that pays..
Suppose the average return on an asset is 11.5 percent and the standard deviation is 20 percent. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel to determine the probability that in any given year you will..
Describe a situation where somebody may need a mortgage, find a specific mortgage product, and describe why the mortgage might be a good fit for the potential borrower's situation. Please take the opportunity to have fun in finance.
Finalize and submit a 10- to 15-page paper that summarizes Riordan Manufacturing's financial state. Include what should be included in the accounting systems, and the systems that should be connected to the accounting system
An investor considering an opportunity that promises to provide 12% returns. They have obtained an estimate of their risk free rate, which is 3%. What is the risk premium assessed for this opportunity? What does the risk premium mean in this example?
Use the following information for Taco Swell, Inc., for Problems 25 and 26 (assume the tax rate is 34 percent): 2014 2015 Sales $12,730 $ 14,229 Depreciation 1,827 1,910 Cost of goods sold 4,377 5,178. calculate the cash flow from assets, cash flow t..
The ABC Company expects stock prices to decrease. The current stock price is $96. The company purchases a put option, with exercise price of $93 and a premium of $3 per share. Assume instead that the stock price was $88 just before the expiration dat..
Acme Corporation just paid a dividend of D 1 = $1.72. Analysts expect the company's dividend to grow by 10% between year 1 and 2, and at a constant rate of 5% from year 2 to 3 and continue with the 5% thereafter. The required return on this low-risk ..
Alice needed capital to expand his business. He borrowed a loan of $20,000,000 from the bank and the load would be compounded monthly at 4.5% p.a. immediately after the loan was incurred. Compute the monthly payment. What was the total interest charg..
Of the following efficient market hypotheses, which one has research generally indicated is not correct? 1. weak 2. Semi Strong 3. strong 4. two of the options
You are considering a project but you realize this project has a net present value of zero. Based on this info, which of the following is true? Select one: the total of the cash inflows must equal the initial cost of the project. the project earns a ..
Val believes the price of ABS is too high at $35/share. She shorts 100 shares. A week later, when she covers her short position, the price is $32/share. How much money did Val make?
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