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Constant growth
You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $3.00 a share at the end of the year (D1 = $3.00) and has a beta of 0.9. The risk-free rate is 5.7%, and the market risk premium is 5.5%. Justus currently sells for $41.00 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? (That is, what is ?) Round your answer to two decimal places. Do not round your intermediate calculations.
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A stock price is currently $40. It is known that at the end of six months it will be either $48 or $32. The risk-free rate of interest with continuous compounding is 8% per annum. Calculate the value of a six-month European call option on the stock w..
CAR Inc. will be liquidated in one year. The value of CAR’s assets is currently $650 million, and next year it will be either $825 million or $400 million. Before shareholders can be paid next year, CAR will have to repay $500 million of debt. What i..
Stock A has an expected return of 12.50 percent and a standard deviation of 25.50 percent. Compute the portfolio’s standard deviation.
You are helping to decide whether or not to start a new project. The project would be housed in a building that is currently 70% full. Your project would use the other 30% of the building. This year, the annual electricity cost for the building is $8..
what is the maximum amount Pierre should be willing to pay for this bond?
Using the following information, calculate the total salesforce size necessary by using each of the following approaches: breakdown, workload, and incremental. Be sure to show your work. Also, explain the advantages and disadvantages of each approach..
Assume the monthly standard deviation of a stock is 3.10 percent. What is the annual standard deviation of the stock?
The following affect option premiums
Calculate the implied repo rate for the March June 2011 Treasury bond futures spread. If the actual forward repo rate is 4 percent, what do you recommend?
You own a bond with duration of 11. You are worried that interest rates may rise and think it is likely that yields will go up 100 basis points from today’s 10%. How would your bond’s value change and by approximately with percent?
What percentage of stock is needed to have one of her friends elected under the cumulative voting rule?
Bayou Okra Farms just paid a dividend of $3.30 on its stock. The growth rate in dividends is expected to be a constant 6 percent per year indefinitely. Investors require a return of 15 percent for the first three years, a return of 13 percent for the..
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