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You have decided to invest 30 percent in X; 30 percent in Y; and 40 percent in Z. The probability of the state of the economy is Boom 25%; Normal 60%; and, Bust 15%. The rate of return for stock X is Boom .20; Normal .15; and, Bust .00. The rate of return for stock Y is Boom .35; Normal .10; and, Bust -.30. The rate of return for stock Z is Boom .60; Normal .05; Bust -.40.
A] What is the portfolio expected return?
B] If the expected T-bill rate is 1.5 percent, what is the expected risk premium on the portfolio?
Based on the cash flows shown in the chart below, compute the IRR and MIRR for Project Erie. Suppose that the appropriate cost of capital is 12 percent. Advise the organization about whether it should accept or reject the project.
An investment will pay you $43,000 in 10 years. If the appropriate discount rate is 7 percent compounded daily, what is the present value? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places. (..
Roxanne invested $520,000 in a new business 3 years ago. The business was expected to bring in $8,000 each month for the next 25 years (in excess of all costs). The annual cost of capital (or interest rate) for this type of business was 4% with month..
Company Alpha ltd has paid the following dividends during the last five years: 1.00 in the first year and 20% annual dividend growth for the subsequent years. If the required rate of return on the stock is 30%, what is the current value of the stock ..
Assume that 4-year Treasury Bonds currently have a nominal yield of 6.2%, and a 4-year Corporate Bonds have a nominal yield of 8.5%. If Maturity Risk Premium (MRP) on all 4-year contracts currently is 1.3%, and Corporate Bonds currently have addition..
Calculate the Company’s Weighted Average Cost of Capital
You deposit $1,900 at the end of each year into an account paying 10.1 percent interest. How much money will you have in the account in 24 years? How much will you have if you make deposits for 48 years?
Analyze the 20-year, 8% coupon rate (annual payment), $1,000 par value bond. The bond currently sells for $1,318. What’s the bond’s yield to maturity?
Midtown's president believes the television station will consider running the Midtown spot announcement on its highly rated evening news program (at the same cost) if Midtown will consider using additional television announcements.
Explain the following statement: The standalone risk of an individual corporate project may be quite high, but viewed in the context of its effect on stockholders’ risk, the project’s true risk may be much lower.
The Browns wish to accumulate at least $150,000 at the time of their last deposit in a college fund for their daughter by contributing an amount A into the account at the end of each year for eighteen years. What is the smallest annual payment A that..
What is dollar cost averaging? If you were an astute investor at timing market moves, would you want to use dollar cost averaging?
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