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Default Risk Premium A company's 5-year bonds are yielding 7.75% per year. Treasury bonds with the same maturity are yielding 5.2% per year, and the real risk-free rate (r*) is 2.3%. The average inflation premium is 2.5%, & the maturity risk premium is estimated to be 0.1(t - 1)%, where t = number of years to maturity. If the liquidity premium is 1%, what is the default risk premium on the corporate bonds?
You own a portfolio that is 34 percent invested in Stock X, 24 percent in Stock Y, and 42 percent in Stock Z. The expected returns on these three stocks are 7 percent, 20 percent, and 16 percent, respectively. What is the expected return on the portf..
Kaylee wants to buy a machine shop on Beaumonde and someday retire from space flight. She purchases a contract to buy a little shop 14 years from today. At that time, it will be worth $10,000. What is the shop worth to Kaylee today? Kaylee has a disc..
What return did you earn? Return earned % What return would you suffer next year for your investment to be valued at the original $3,000?
The company is in a 40 percent tax bracket. What will be the firm's after-tax cost of debt on the bond?
How much do you need to save each month, earning 5% interest, in order to have a Future Value (FV) of $40,000? Suppose you don't wait and purchase the $40,000 car today. If you financed the entire $40,000, how much are the monthly payments if you pay..
What % of the bottles will be considered under filled? Compute and interpret the machine's Cp. Compute and interpret the machine Cpk.
Maxwell Software, Inc., has the following mutually exclusive projects. Year Project A Project B 0 –$17,000 –$20,000 1 10,500 11,500 2 7,000 8,000 3 2,600 7,000 a-1. Calculate the payback period for each project. Payback period Project A years Projec..
The trading cost per sale or purchase of marketable securities to be $280 per transaction. What will be its optimal cash return point?
If a bond's yield to maturity is higher than its coupon rate, the bond will sell at a discount.
Fama’s Llamas has a weighted average cost of capital of 9.5 percent. The company’s cost of equity is 11 percent, and its cost of debt is 7.5 percent. The tax rate is 40 percent. What is the company’s debt–equity ratio?
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $840 per set and have a variable cost of $440 per set.
A fast-growing firm recently paid a dividend of $0.65 per share. The dividend is expected to increase at a 20 percent rate for the next four years. Afterwards, a more stable 10 percent growth rate can be assumed. If an 11.5 percent discount rate is a..
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