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You are trying to choose between investing in an Index mutual fund (that mimics the S&P500) or buying units of an exchange-traded fund (ETF) that invests directly in the S&P500. Both investments give you exposure to the S&P500, but the difference is in the way fees are assessed. The mutual fund subtracts an annual fee of 2% from the gross returns on the portfolio. The S&P500 is expected to grow at a rate of 11% (0.9167% per month) in the future, so the return on the index mutual fund will be 9% (0.75% per month). You are 30 years old today. You plan to save $600 per month at the end of each month until your 60th birthday. So, you expect to accumulate $1,098,446.08 by investing in the mutual fund. Alternatively, you could invest in the ETF. With the ETF there are no management expenses which reduce the return- you will earn the same return as the S&P500. However, you pay a brokerage commission each time that you trade. How big does the trading commission ($fee) have to be on the ETF in order for the future value of the two strategies to be equal? (Assume monthly periodicity and monthly purchases of the ETF. Ignore any commission on selling at age 60)
A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per share and sells for $56. What is the total rate of return on the stock? What are the dividend yield and percentage capital gain?
Which one of the following will increase the current value of a stock?
Your portfolio is diversified. It has an expected return of 11.0% and a beta of 1.10. You want to add 300 shares of Kraft Foods Inc at $40 a share to your portfolio. Calculate the expected beta on the portfolio after you have added Kraft Foods Inc's ..
Your client is 31 years old; and she wants to begin saving for retirement, with the first payment to come one year from now. She can save $8,000 per year; and you advise her to invest it in the stock market, which you expect to provide an average ret..
What is the bond's yield to maturity (expressed as an APR with semiannual compounding)?
A stock had returns of 10 percent, 21 percent, and 8 percent for the past 3 years. Based on these returns, what is the probability that this stock will earn at least 20.00 percent in any one given year? Provide detailed calculations of Excel function..
An investmernt will pay $100 at the end of each of the next 3 yrs $200 at the end of yr 4 $300 at the end of 5yr and $500 at the end of yr 6.
Barnes Enterprises has bonds on the market making annual payments, with 16 years to maturity, a par value of $1,000, and a price of $968. At this price, the bonds yield 8 percent. What must the coupon rate be on the bonds?
The interest is paid semi-annually. What is the present value of the interest tax shield if the tax rate is 31 percent?
Grummon Corporation has issued zero-coupon bonds with five-year maturity. (assume $100 face value bond) Investors believe there is a 25% chance that Grummon will default on these bonds. What will be the price of these bonds? what is the yield to matu..
How much interest on interest will he earn over the next 15 years?
determine whether the manager is saying the firm is under-valued or over-valued.
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