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Suppose you observed the following situation?
Return if state occurs
Sate of Economy Posibility of state of economy Stock A Stock B
Bust .10 -.12 -.05
Nornal .65 .09 .10
Boom .25 .35 .21?
A. Calculate the expected return of each stock
B. Assuming the capital asset pricing models holds and stock A's beta is greater than stock B's beta by .25, what is the expected market risk premium?
You want to have $20,000 for the down payment on a house in 10 years. Your parents have promised to give you $3,000 in two (2) years. How much do you need to set aside today if you can earn an 8% APR with monthly compounding on the money you save and..
Using only.gov Websites report the current GDP, the current Federal deficit, the current Federal debt, the bottom line of the current (last) budget approved by Congress (surplus or shortage). Note that the fiscal year for the federal government is Oc..
The LPD company has a $10,000 note receivable from a customer due in three years. How much is the note worth today if the interest rate is 9%? What interest rate is implied if you buy a TV for $750 and pay in monthly installments of $66.64 for one ye..
Pick any industry that you would like to know more about (automobile industry). What are some examples of short term versus long term projects that may be adjusted if a recession is on the horizon? Write in detail with descriptive examples.
Compare and contrast the three tools used to deal with uncertainty in discounted cash flow analysis: scenario analysis, break-even analysis, and simulation.
Janicex Co. is growing quickly. Dividends are expected to grow at a rate of 24 percent for the next three years, with the growth rate falling off to a constant 6 percent thereafter. If the required return is 11 percent and the company just paid a div..
Based on the information provided prepare the following operating budgets for 2015: Sales, Production, Direct Material, Direct Labor, Manufacturing Overhead, Ending Inventory, Cost of Goods Sold, Selling, General and Administrative Budgets, and a Bud..
The Muse Co. just issued a dividend of $ 2.75 per share on its common stock. The company is expected to maintain a constant 5.8 percent growth rate in its dividends indefi nitely. If the stock sells for $ 59 a share, what is the company’s cost of equ..
On January 1, you sold short one round lot (that is, 100 shares) of Lowe's stock at $21 per share. On March 1, a dividend of $3 per share was paid. What is the proceeds from the short sale (net of commission)? What is the dividend payment.
Suppose that the premium on a European put option, p = $5. The time to maturity, T = 1 year. The strike price is $22. The stock price of the underlying common stock is $14 today. The risk-free interest rate is 10% per annum. The stock does not pay di..
A T-bill with face value $10,000 and 89 days to maturity is selling at a bank discount ask yield of 3.6%. a. What is the price of the bill? What is its bond equivalent yield? What is the price of the bill?
Jackson Central has a 8-year, 8% semi-annual coupon bond. Jackson Central bond’s currently sells for 111. According to data, a 8-year, 8% Treasury bond sells for 125. What is the expected percentage price change of this bond?
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