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1. An interest rate is quoted as 5% per annum with semiannual compounding. What is the equivalent rate with (a) annual compounding, (b) monthly compounding, and (c) continuous compounding.
2. The 6-month, 12-month, 18-month, and 24-month zero rates are 4%, 4.5%, 4.75%, and 5%, with semiannual compounding.(a) What are the rates with continuous compounding?
(b) What is the forward rate for the 6-month period beginning in 18 months?
(c) What is the value of an FRA that promises to pay you 6% (compounded semiannually) on a principal of $1 million for the 6-month period starting in 18 months?
Strengths of scenario analysis as compared to sensitivity analysis include which of the following? Scenario analysis considers the sensitivity of net present value to changes in key variables, the likely range of variable values, and the interactions..
Assume that the risk-free rate is 4.5% and that the market risk premium is 8%. What is the required rate of return on a stock with a beta of 0.8? What is the required return on the market? What is the required rate of return on a stock with a beta o..
A company compensates executives with 10-year Euaropean call options which is granted at the money. If there is a significant drop in the share price, the company's board will reset the strike price of the options to equal the new share price. Calcul..
A stock is trading at $40 per share. The stock is expected to have a year-end dividend of $2 per share (D1 = $2), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 14%
What is the proper or customary behavior in your work environment? This will often be a topic within the organization you work for and is tied to the company culture. Social networking sites like Facebook, LinkedIn, and Twitter are pervasive and comm..
What is the current price for Berkshire Hathaway stock, class A. What kind of signal do you think it sends? Has the class A stock has ever had a stock split?
Determine Butler-Huron's cash conversion cycle. Determine Butler-Huron's cash conversion cycle assuming that 75 percent of annual sales are credit sales (i.e., 25 percent represent cash sales).
Income Statement Preparation: On December 30,2015, Cathey Chen, a self employed CPA, completed her first full year in business. During the year, she billed $360000 for her accounting services. She had two employees, a bookkeeper and a clerical assist..
What is the ex-dividend price of a share in a perfect capital market - What net tax savings per share for an investor would result from this decision?
Six months ago, you purchased 300 shares of stock at a cost of $7,287. The stock pays an annual dividend of $1.12 per share. Today, you sold those shares for $28,20 each. What is the capital gain yield on this investment? What was the total yield on ..
Analysis of past monthly movements in IBM's stock price produces the following estimates: α = 2.5% and β = 1.6. If the market index subsequently rises by 12% in one month and IBM's stock price increases by 20%, what is the abnormal change in IBM's st..
Black Hill Inc. sells $100 million worth of 27-year to maturity 10.81% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $975 for each $1,000 bond. What is the before-tax cost of capital for this debt financing?
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