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1. Select all the market conditions that apply to the situation below. An asset's spot price is $78/unit and its expected 90-future spot price reflects $6/unit storage costs, $1/unit net interest, and $3/unit risk premium. The asset's 90-day forward price is $85/unit.
Backwardation
Normal backwardation
Contango
Normal contango
(Must pick two options)
2. You purchase one share of stock for $67.30. One year later, you receive a dividend of $4.60 on the share and then sell the share for $66.90. Calculate the dividend yield.
3. A stock's current price is 79 and it has declared dividends of $1.3/share each to be paid in 38 days, 158 days, and 278 days from now. Price a 300-day forward contract assuming that the risk free rate is 2%. Provide the forward price rounded to two decimals.
The real risk-free rate, r*, is 2.1%. Inflation is expected to average 3.2% a year for the next 4 years, after which time inflation is expected to average 4.05% a year. Assume that there is no maturity risk premium. An 8-year corporate bond has a yie..
Retirement funding is generally known as a "three-legged" stool with Social Security, Personal Funds, and Pension Funds making up those three legs.
If the required rate of return by common stockholders (Ke) is 14 percent, what is the price of the common stock?
Mr. Dapang expects tracking stock on Dow Jones Industrial Average to trade out of current range of price lot, but he is not sure about which direction will go.
Joe Meat Corp. is considering replacing its old freezer with a new one that has more capacity. The company estimates that it can sell more meat products with and estimated increase of $15,000. What is the net present value of the freezer if the requi..
What is the yield-implied price for the bond? Compute duration and convexity for the bond. What do you conclude about the accuracy of the two rules?
Blasco just paid an annual dividend of $1.24 a share. What is one share of this stock worth to you if the dividends increase by 2 percent annually and you require a rate of return of 12 percent?
Jackson Corporation's bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1000 par value, and the coupon interest rate is 8%. The bonds have a yield to maturity of 9%. What is the current market price of these bond..
A stock sells for $30. The next dividend will be $6 per share. If the return on equity ROE is a constant 15% and the company reinvests 20% of earnings in the firm, what must be the opportunity cost of capital?
In addition, consider both “Hard” and “Soft” analysis identifying how they would be utilized by type of project.
After successfully completing your corporate finance class, you feel the next challenge ahead is to serve on the board of directors of Schenkel Enterprises. Unfortunately, you will be the only individual voting for you. Assume that Schenkel uses cumu..
You must evaluate a proposed spectrometer for the R&D department. The base price is $230,000, and it would cost another $46,000 to modify the equipment for special use by the firm. What is the initial investment outlay for the spectrometer, that is, ..
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