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In the Long-term Capital Management (LTCM) bankruptcy case, as losses started to mount beyond acceptable boundaries, why weren’t the positions closed out?
A. Lack of timely information sharing inside the firm
B. Lack of cash reserves to meet the margin requirement
C. Lack of liquidity
D. None of the above
What is a measure of the sensitivity of a stock or portfolio to market risk?
Fontaine Inc. recently reported net income of $7 million. It has 770,000 shares of common stock, which currently trades at $25 a share. Fontaine continues to expand and anticipates that 1 year from now, its net income will be $10.15 million. Assuming..
Your company is forecasting cash flows of $15 million next year, $25 million in year 2 and $40 million in year 3. After that growth in cash flows is expected to level out at 5% per year. Your company has $150 million in marketable securities and $350..
Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $1.75 coming 3 years from toda..
What type of analysis has the risk team performed and how do you arrive at this answer? If you were a board member, what issues might you have with this way of reporting VaR?
Stock Y has a beta of 1.6 and an expected return of 16.6 percent. Stock Z has a beta of 0.8 and an expected return of 9.4 percent. If the risk-free rate is 5.1 percent and the market risk premium is 6.6 percent, the reward-to-risk ratios for stocks Y..
Suppose your company needs to raise $44 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond issue will be 8 percent, and you’re evaluating two issue alternatives:
Consider an investment that cost $150,000 and has a cash inflow of $40,000 every year for 5 years. The required return on the investment is 8%. Find the NPV of the investment and determine if it should be purchased.
Explain why the yield curves for US treasury securities normally slopes upward, so that Treasuries with longer terms to maturity have higher yields to maturity. What would a downward sloping treasury yield curve with yields steadily declining from 3 ..
Suppose you know that a company’s stock currently sells for $51 per share and the required return on the stock is 11 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. It's ..
What is the meaning of an Index fund? Explain the 75, 5 and 10 percent rules in finance terms What three investment companies are defined by the investment company Act of 1940?
Suppose that you have been placed in charge of calculating the user cost of capital for a corporation. You know that capital costs are debt-financed at the margin and you have the following additional information. In the absence of taxes, what is the..
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