Annualized interest rate in financial decisions

Assignment Help Financial Management

Reference no: EM132014699

1. What is the correct way to annualize an interest rate in financial decisions?

2. John is watching an old game show on rerun television called Let’s Make a Deal in which you have to choose a prize behind one of two curtains. Behind one of the curtains is a gag prize worth $ 150, and behind the other is a round-the-world trip worth $7,200. The game show has placed a subliminal message on the curtain containing the gag prize, which makes the probability of choosing the gag prize equal to 75 percent. What is the expected value of the selection, and what is the standard deviation of that selection?

3. Zippy Corporation just sold $30 million of convertible bonds with a conversion ratio of 40. Each $1,000 bond is convertible into 25 shares of Zippy’s stock.

a. What is the conversion price of Zippy’s stock?

b. If the current price of Zippy’s stock is $15 and the Company’s annual stock return is normally distributed with a standard deviation of $5, what is the probability that investors will find it attractive to convert the bond into Zippy stock in the next year?

Reference no: EM132014699

Questions Cloud

Find future values of these ordinary annuities : Find the future values of these ordinary annuities. Compounding occurs once a year.

What is the present value of all of these cash flows : What is the present value of all of these cash flows if the annual interest rate is 11%?

What is fund required rate of return : If the market's required rate of return is 12% and the risk-free rate is 5%, what is the fund's required rate of return?

Calculate the gross income multiplier : Calculate the gross income multiplier for the following investment.

Annualized interest rate in financial decisions : What is the correct way to annualized an interest rate in financial decisions?

Making comparative analysis between the different types : What factors did affect the price of British Pound last year? describe each by making a comparative analysis between the different types.

Riskier stock exceed required return on less risky stock : By how much does the required return on the riskier stock exceed the required return on the less risky stock?

Straddle when the price of the underlying asset : Find the profit of this straddle when the price of the underlying asset is S = $35.

This straddle when the price of underlying asset : Find the profit of this straddle when the price of the underlying asset is S = $28.

User Account

All Pages