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Assume the risk-free rate is 4%. You are a financial advisor and your client has decided to invest in exactly one of two risky funds, A and B. She comes to you for advice. Whichever fund you recommend she will combine it with the risk -free asset. Expected returns are E(RA) = 13% and E(RB) = 18%. Volatilities are σA = 20% and σB = 30%. Without knowing your client’s tolerance for risk, which fund would you recommend? (Hint: Compute for Sharpe Ratio)
Cool Shoes (CS) had 2014 sales of $518 million. You expect sales to grow at 9% next year(2015), Using the DCF method, determine the enterprise value of CS.
If the price of Seerex common stock is $21.10, what is the cost of its common equity capital?
Lately, venture capital firms have been investing in companies that are close to going public, and in larger start-up firms such as Google. Venture capital firms prefer to risk their money on proven business models. Discuss what types of companies ty..
How large will this balloon payment have to be for you to keep your monthly payments at $1,050?
Nonconstant growth Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends.
A town has to resurface a section of its roads. There are two options: gravel or going through another company that uses another surfacing technique. The gravel has an initial cost of $200,000 to put down and it costs $15,000 to grade the road on an ..
You invest one-third of your wealth in each of three stocks. The expected return and standard deviation of each individual stock is 10 percent and 20 percent, respectively. What is the expected return of the portfolio? What is the risk reduction of ..
The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond ..
Compute the price of a $1, 000 par value, 20 percent (semi-annual payment) coupon bond with 11 years remaining until maturity assuming that the bond's yield to maturity is 12 percent?
A 10-year bond pays interest of $27.30 semiannually, What are its annual coupon rate and yield to maturity?
Using the spot rates, calculate the price and ytm of a 4-year bond that pays a 4.125% coupon rate (assume annual payments).
Your research has determined the following: Company (Co.) A current dvd is 1.36, Beta = 1.7 and P/E is 23. Cash flow to equity per share is 4.72. Current risk free rate is 2.5% and the expected market return is 10%. Co. A ROE is 16% and has an EPS of..
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