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Calculate the following:
a) Suppose you wish to raise some money for your favorite local charity. This charity needs $50,000 a year to run their operation and you want to make sure that they are ensured an annual payment of this amount from now on for every in the foreseeable future. Given an interest rate of 5%, how much would you have to fund this perpetuity to guarantee this charity a payment of $50,000 per year?
b) You decide to put $1,000 in a new bank account and don’t plan to withdraw the money for 10 years. If your bank does continuous compounding and the interest rate is 1%, what will be the future value of this bank account in 10 years?
You have $100,000 to invest in either Stock D, Stock F, or a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 10.9 percent.
Kirk, Inc. 35,000 shares outstanding, Price per share: $37 Beg of year, $42 End of year. Picard Co. 26,000 shares outstanding, Price per share: $84 Beg of year, $91 End of year. Calculate the index return for the information using a value-weighted in..
Company ABC’s free cash flow to equity (FCFE) was $50 million at the beginning of the year.
Economic State Probability Return Fast growth 0.31 32 % Slow growth 0.43 10 Recession 0.26 –33 Determine the standard deviation of the expected return.
As part of your financial planning, you wish to purchase a new car exactly 5 years from today. The car you wish to purchase costs $14,000 today, and your research indicates that its price will increase by 2% to 4% per year over the next 5 years. Esti..
The risk-free rate of return is 8 percent, the required rate of return on the market, E[Rm] is 12 percent, and Stock X has a beta coefficient of 1.4. If the dividend expected during the coming year, D1, is $2.50 and g = 5%, at what price should Stock..
Suppose one dollar equals 8,700 units of a foreign currency. If the foreign currency appreciated by 5 percent, how much would one dollar equal in the foreign currency?
Cite five examples of assets that are not presently included on the balance sheet.- Discuss the implications of unrecorded assets for financial statement analysis.
The efficient markets hypothesis states that:
Comparing stocks versus bonds:
The security market line (SML) provides the relationship between risk and required rate of return. Which of the following statements about the SML is most correct? The relevant risk is portfolio risk, which is measured by beta The relevant risk is to..
An annuity of $1,000 per year has 10 annual cash flows, with the first one being today. At an interest rate of 15% annually, what is the annuity’s future value?
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