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Suppose that a major city’s main thoroughfare, which is also an interstate highway, will be completely closed to traffic for two years, from January 2014 to December 2015, for reconstruction at a cost of $535 million. If the construction company were to keep the highway open for traffic during construction, the highway reconstruction project would take much longer and be more expensive. Suppose that construction would take four years if the highway were kept open, at a total cost of $800 million. The state department of transportation had to make its decision in 2014, one year before the start of construction (so that the first payment was one year away). So the department of transportation had the following choices: (i) Close the highway during construction, at an annual cost of $267.5 million per year for two years. (ii) Keep the highway open during construction, at annual cost of $200 million per year for four years.
Suppose the interest rate is 10%. Calculate the present value of the costs incurred under each plan.
The present value of plan (i) is: $ million. (Round your answer to two decimal places.)
The present value of plan (ii) is: $ million. (Round your answer to two decimal places.)
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Determine the beta of one security by regressing the returns for the share on the returns for the FT ALL Share Index and determine the co-variances for each pair of securities in the portfolio
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In early 2010, the possibility that Greece might default on its sovereign debt caused the spread between German and Greek debt to ____ by about ____ percentage points
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An arbitrager at Deutsche Bank notices that the yield on Brazilian Real 6-month risk-free bills is 5.5% per annum and the yield on U.S. 6-month T-bills is 7% per annum. What transactions will the arbitrageur undertake to realize arbitrage profits in ..
You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 11 percent and 15 percent, respectively. The standard deviations of the assets are 23 percent and 31 percent, respectively. The correlation be..
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