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Design an investment of $20000 in a portfolio of duration 2 years consisting of two kinds of coupon bonds maturing after 2 years with annual coupons – bond A pays $20 coupons and $100 face value, bond B pays $5 coupons and $500 face value, given that the initial rate is 8%. How much will this investment be worth after 2 years? Compare this to the future value of $20000 at 8% rate. (We are supposed to find the weights ourselves. I tried to calculate them myself and got wA=-0.0746 & wB=1.0746)
A stock has an expected return of 12.9 percent and a beta of 1.15, and the expected return on the market is 11.9 percent. What must the risk-free rate be?
A portfolio has 45 percent of its funds invested in Security One and 55 percent invested in Security Two. Security One has a standard deviation of 6 percent. Security Two has a standard deviation of 12 percent. The securities have a coefficient of co..
What are the three ways in which derivatives can be misused?
Assume Chen and Beck are two Japanese firms of comparable size in the igloo building industry. Both have a 30% tax rate. Chen has zero debt, a beta of 1.2 and Beck has a beta of 1.5. Estimate Beck’s .debt-to-equity ratio.
A stock has an expected return of 10.7 percent, its beta is 0.98, and the risk-free rate is 6.15 percent. What must the expected return on the market be?
Now use Goal Seek to determine the interest rate required for the bank account to make the decision alternatives equivalent.
What would the market price of the security be if its beta decreases by the average of the last two digits of your student ID number
Which of the following one-year $ 1000 bank loans offers the lowest effective annual rate. A loan with an APR of 6.3 %, compounded monthly. b. A loan with an APR of 6.3 %, compounded? annually, that also has a compensating balance requirement of 10.2..
In downtown Dover Massachusetts there is a small retail establishment called the Dover Pharmacy. It is for sale to new owners. It sells beverages and food for breakfast and lunch. Is the cost of $50,000 today a fair price for this current business if..
The machine will require some maintenance in year 2 for $1000 and the company can borrow from its bank at Prime plus 5.75%. Is this a good investment?
When is the mean most apprpriate for summarizing a data set? What are some examples of short term funding instruments for financial institutions?
Hankins, Inc., is considering a project that will result in initial aftertax cash savings of $6.2 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. The firm has a target debt–equity ratio ..
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