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Douglas Keel, a financial analyst for Orange Industries, wishes to estimate the rate of return for two similar-risk investments, X and Y. Douglas's research indicates that the immediate past returns will serve as reasonable estimates of future returns. A year earlier, investment X had a market value of $20,000; investment Y had a market value of $55,000. During the year, investment X generated cash flow of $1,500 and investment Y generated cash flow of $6,800. The current market values of investments X and Y are $21,000 and $55,000, respectively. a. Calculate the expected rate of return on investments X and Y using the most recent year's data.b. Assuming that the two investments are equally risky, which one should Douglas recommend? Why?
Old Time Savings Bank pays 4% interest on its savings accounts. If you deposit $1,000 in the bank and leave it there, how much interest will you earn in 1st year?
A firm has a reputation of highly volatile earnings. What incentive would an investor have to buy a convertible bond?
Suppose the firm has no excess cash. Assume the spot rate of the pound is $2.02, the 180-day forward rate is $2.00. The British interest rate is 5 percent,
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If the bond is selling for $850 on January 1. 2014, then what was your rate of return on this bond during the holding period of calendar year 2013?
Why does not a political equilibrium lead to efficiency in the way that equilibrium in private goods markets does.
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