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Mr. Moore is thinking about how much the return of Apple stock could be given it's beta of 1.11 for a possible investment he wants to make. Other data you have collected: the rate of return on 90 day T-Bills is 1.5%, on 5 year T-Notes it 3% and on the "long bond", the 30-year T- Bond = 6.5%. The Prime is 6%, LIBOR is 5.5% and the average return on the overall stock market is estimated to be 8%.After doing some research and crunching the numbers what would Mr. Moore expect the rate of return on Apple's stock to be? Hint: note that term "beta" - there's a classic formula that uses "beta"!
A share of stock with a beta of .77 now sells for $50. Investors expect the stock to pay a year-end dividend of $3. The T-bill rate is 4%, and the market risk premium is 8%. Suppose investors believe the stock will sell for $52 at year-end. Is the st..
Suppose that we interview a group of investors who chose to invest 40% of their portfolio in small US stocks and 60% in the risk-free asset. We then ask them which asset from (2) that they prefer. Most answer that they prefer. what does this imply ab..
A 7.4 percent corporate coupon bond is callable in five years for a call premium of one year of coupon payments. Assuming a par value of $1,000, what is the price paid to the bondholder if the issuer calls the bond?
The best of a group of independent projects competing for the firm’s fixed capital budget of $4.5 million. The firm recognizes that any unused portion of this budget will earn less than its 15% cost of capital, thereby resulting in a present value of..
The risk free rate is 7%, the return in the market is 10%, and the beta is 1.30. What return must you receive to be satisfied that you are being fairly compensated for the risk of the firm? What should a zero coupon bond maturing for $1000 in 9 years..
We respect and understand that quality of care is a worthy goal and absolute requirement for healthcare providing organizations. Give three examples of how quality of care may be increased and achieved.
What are the portfolio weights for a portfolio that has 120 shares of Stock A that sell for $81 per share and 95 shares of Stock B that sell for $70 per share?
The following data apply to Neuman Corporation's convertible bonds: Maturity: 10 Stock price: $30.00 Par value: $1,000.00 Conversion price: $35.00 Annual coupon: 5.00% Straight-debt yield: 8.00% What is the bond’s conversion ratio? What is the bond’s..
Cost of debt using both methods Currently, Warren Industries can sell 15-year, $1,000-par-value bonds paying annual interest at a 12% coupon rate. Find the net proceeds from sale of the bond, Nd. Calculate the before-tax and after-tax costs of debt.
Is there a limit to the amount of interest that you can get? Consider the case of investing $1 at 100% interest for 1 year. Your interest calculation is $1 if the interest is computed at the end of the year (simple interest). When your bank does calc..
Is the purpose of commercial bank regulation to prevent bank failures? Explain.
What weights should we use when calculating the WACC, market value weights or accounting book values. To do this find the market value of equity (no. of shares times the share price) and the market value of financial debt (if no traded debt you may n..
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