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Suppose Blek stock has a beta of 1.7, whereas Gell stock has a beta of 0.96. If the risk free interest rate is 4.2% and the expected return of the market portfolio is 13.4%, according to the CAPM,
a. What is the expected return of Blek stock?
b. What is the expected return of Gell stock?
c. What is the beta of a portfolio that consists of 70% Blek stock and 30% Gell stock?
d. What is the expected return of a portfolio that consists of 70% Blek stock and 30% Gell stock?
A 15-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 12%. What is the bond’s yield to maturity if the bond is selling for $1,070?
The stock of Ragnar Lothbrok's Viking Cruises is currently selling for $117.13, which equates to a P/E ratio of 16x. Using the P/E ratio, compute the current EPS of Mr. Lothbrok's stock.
In addition, Russia's inflation rate was high. Explain the type of pressure that these factors placed on the Russian currency.
Powell Motors Inc. is considering investing in a project in which the risk is greater than the firm's current risk based on any method for assessing risk. Which of the following should management do when evaluating this project? A firm's after-tax co..
The company is choosing between machine A and B (they are mutually exclusive and the company can only pick one). The initial cost of machine A is $400,000 and it will last for 7 years before it needs to be replaced. Calculate the 7 year and 5 year an..
What are the key activity areas for securities firms? How does each activity area assist in the generation of profits and what are the major risks for each area?
Suppose that a firm's common equity is selling for $150 in the market, that the firm has $115 million in Net Income, and the firm has 20 million common shares outstanding. Finally, the firm faces a moderately high cost of common equity of 14%. What..
Wu Corporation has been offered a loan of $1,000,000 at a rate of 8.5%, simple interest, with monthly interest payments and a 365-day year. What would the effective interest rate be on this loan? If Wu's $1,000,000 loan had been 8.5%, add-on, payable..
Digital Organics (DO) has the opportunity to invest $0.98 million now (t = 0) and expects after-tax returns of $580,000 in t = 1 and $680,000 in t = 2. The project will last for two years only. The appropriate cost of capital is 14% with all-equity f..
A bond sells for $1500 and it pays $100 per annum till its maturity 18 years from now. The firm, however, may call it back after 3 years at $1100. Derive its ytm and its call rate. Compare the ytm and the call rate. Are they reasonable? Why, or why n..
Bond J has a coupon rate of 6 percent and Bond K has a coupon rate of 12 percent. Both bonds have 15 years to maturity, make semiannual payments, and have a YTM of 9 percent. If interest rates suddenly rise by 2 percent, what is the percentage price ..
The state of Alabama has legally earmarked around 85 percent of its state budget.
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