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You have finally saved $10,000 and are ready to make your first investment. You have the three following alternatives for investing that money:• Capital Cities ABC, Inc. bonds with a par value of $1,000, that pays an 8.75 percent on its par value in interest, sells for $1,314, and matures in 12 years.• Southwest Bancorp preferred stock paying a dividend of $2.50 and selling for $25.50.• Emerson Electric common stock selling for $36.75, with a par value of $5. The stock recently paid a $1.32 dividend and the firm's earnings per share has increased from $1.49 to $3.06 in the past five years. The firm expects to grow at the same rate for the foreseeable future.Your required rates of return for these investments are 6 percent for the bond, 7 percent for the preferred stock, and 15 percent for the common stock. Using this information, answer the following questions.a. Calculate the value of each investment based on your required rate of return.b. Which investment would you select? Why? c. Assume Emerson Electric's managers expect an earnings downturn and a resulting decrease in growth of 3 percent. How does this affect your answers to parts a and b?d. What required rates of return would make you indifferent to all three options?
Given the returns and probabilities for the three possible states listed here, calculate the covariance between the returns of Stock A and Stock B. For convenience, assume that the expected returns of Stock A and Stock B are 0.13 and 0.18, respect..
Discuss the ratio trends of bank of America (stock companies )and compare/contrast these trends with those of another company.
Teldar's post-merger beta is estimated to be 1.7, and its post-merger tax rate would be 35%. The risk-free rate is 6%, and the market risk premium is 5.5%. What is the value of Teldar to Gekko Properties?
How many in U.S. dollars did firm save by eradicating its foreign exchange currency risk with its forward market hedge?
the sarbanes-oxley act changed the rules and practices of the accounting profession drastically . discuss the changes
drywall systems inc. is presently in discussions with its investment bankers regarding the issuance of new bonds. the
1.with a you and usually your employer pay funds into your retirement plan.nbspa. contributory retirement plan nbspb.
Suppose that in recent years, both expected inflation and the market risk premium have declined. Suppose also that all stocks have positive betas.
Briefly explain what the consequences of such misevaluations might be. If appropriate, offer any thoughts on possible remedies.
what is the risk on different financial assets and what is affecting their risk?how many different bonds and stocks
some companiesrsquo debt-equity targets are expressed not as a debt ratio but as a target debt rating on a firmrsquos
Ninja Co. issued 15-year bonds a year ago at a coupon rate of 8.1 percent. The bonds make semiannual payments. If the YTM on these bonds is 6.4 percent, what is the current bond price?
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