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Expected and required rates of return
Assume that the risk-free rate is 3.5% and the market risk premium is 4%.
What is the expected return for the overall stock market? Round your answer to two decimal places. %
What is the required rate of return on a stock with a beta of 1.2? Round your answer to two decimal places. %
Magnus Credit Corp. wants to earn an effective annual return on its consumer loans of 17.75 percent per year. The bank uses daily compounding on its loans. What interest rate is the bank required by law to report to potential borrowers?
The Schuhmacher corporation has debt outstanding. The total amount that it will have to pay to bondholders in one year's time at date 1 is $100 million. The firm's position since it has issued the debt five years about has steadily deteriorated. It o..
You are looking at a one-year loan of $15,500. The interest rate is quoted as 8.9 percent plus four points. A point on a loan is simply 1 percent (one percentage point) of the loan amount. Quotes similar to this one are common with home mortgages. Wh..
Apocalyptica Corp. pays a constant $9.50 dividend on its stock. The company will maintain this dividend for the next 11 years and will then cease paying dividends forever. If the required return on this stock is 11 percent, what is the current share ..
You get a quote of 1.09 USD/CAD, and 98.6 JPY/USD. What is the resulting JPY/CAD exchange rate?
Suppose managers will engage in empire building unless that behavior increases the likelihood of bankruptcy.
What percentage of the outstanding principal do you pay in interest each? month?
The common stock of Winsson, Inc. is currently priced at $52.50 a share. One year from now, the stock price is expected to be either $54 or $60 a share. The risk-free rate of return is 4%. What is the value of one call option on Winsson stock with an..
The firm's total capital is $120 million and it finances with only debt and common equity. What is its debt-to-capital ratio?
Your biotech company has the opportunity to invest in a new drug project. What is the NPV of the project?
What else must the company have also announced if its stock price and total expected return remained constant following this announcement?
Charlene can afford car payments of $185 a month for 48 months. If the interest rate is 5.65 percent, how much money can she afford to borrow?
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