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You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $2.25 a share at the end of the year (D1 = $2.25) and has a beta of 0.9. The risk-free rate is 5.0%, and the market risk premium is 4.5%. Justus currently sells for $35.00 a share, and its dividend is expected to grow at some constant rate, g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years?
Describe the features of a futures contract that make it more liquid than a forward contract.- Why is fungibility an important feature of futures contracts?
You’re trying to save to buy a new $195,000 Ferrari. You have $32,000 today that can be invested at your bank. The bank pays 3.9 percent annual interest on its accounts. Required: How long will it be before you have enough to buy the car?
Assume all holidays are taken. What is the worked hourly rate of pay?
Use the Black-Scholes formula to calculate the premium for a call with a strike of $50, a stike of $55 (already done), and a stike of $60.
If you buy a computer directly from the manufacturer for $2,725 and agree to repay it in 36 equal installments at 1.94% interest per month on the unpaid balance
What is the value of a bond that has a par value of $1,000, a coupon rate of 17.24% (paid annually) and matures in 8 years? Assume a required rate of return on this bond is 13.53%.
Suppose, the current spot rate for US Dollar ($) against the Australian Dollar (A$) is $0.7268/A$, while the six-month forward rate is $0.7033/A$. An investor expects that the spot rate will be $0.6800/A$ in the next six months. Calculate the investo..
Use risk-neutral valuation to calculate the price of the security at time t in terms of the stock price, S, at time t.- Confirm that your price satisfies the differential equation.
Maloney, Inc., has an odd dividend policy. The company has just paid a dividend of $6 per share and has announced that it will increase the dividend by $5 per share for each of the next five years, and then never pay another dividend. If you require ..
You notice in the notes to the financial statements that “Inventories are stated at lower of cost or market. Cost is determined on the first-in, first-out basis.” How would the financial statements differ if the company used LIFO instead of FIFO? How..
Ranyard's beta is 1.13, and the last dividend per share paid was $4.21. The market risk premium is estimated to be 7.56%, and the real rate of interest is 2.04%. The liquidity risk premium is 0.7%. Analysts expect the company to grow at a rate of 3.5..
Consider a 10-year project with the following information: initial fixed asset investment = $360,000; straight-line depreciation to zero over the 10-year life; zero salvage value; price = $29; variable costs = $18; fixed costs = $169,200; quantity so..
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