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UPS a delivery service company, has a beta of 1.1 and Wal-Mart has a beta of 1 The risk-free rate of interest is 4% and the market risk premium is 7%. What is the expected return on a portfolio with 40% of its money in UPS and the balance in Wal-Mart?
A. 12.41%
B. 10.72%
C. 10.15%
D. 11.28%
Compute the price of an American put option with strike K=110 and maturity T=.25 years.
Even though the underlying stock pays no dividend and the riskless rate is positive, exhibit a scenario in which early exercising an American put could be more beneficial than holding it till expiry.
A University has been approached by a wealthy donor who is interested in providing $500,000 in scholarships each year in perpetuity for finance majors. After consulting with the University's investment firm it is determined that the donation can be i..
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Sanders Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $289,000. The facility is to be fully depreciated on a straight-line basis over seven years. The real discount rate is 6 percent. The corporate tax rate ..
What is the present value of the technology if the discount rate is 10 percent.
Payday loans are very short-term loans that charge very high interest rates. You can borrow $500 today and repay $590 in four weeks. What is the compounded annual rate implied by this 18 percent rate charged for only four weeks?
For installation of a new mini hydropower project, the utility must deposit enough money in a fund earning 8%/year to pay the $5,000 per year operating cost as well as the initial turbine and future replacement costs for the turbine every 40 years. A..
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A company's 5-year bonds are yielding 7.4% per year. what is the default risk premium on the corporate bonds?
You are considering a 20-year, $1,000 par value bond. Its coupon rate is 9%, and interest is paid semi-annually. If you require an "effective" annual interest rate (not a nominal rate) of 10.59%, how much should you be willing to pay for the bond? Do..
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