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Relate the CAPM formula to the Security Market Line (SML) and explain what the SML shows
Explain how inflation affects the SML
Explain how changes in investor risk aversion (MRP) affects the SML
A 30-year annuity pays $1,000 semiannually (i.e., every six months). The interest rate is i^(12) = 12%. Find the present value of this annuity 12 months prior to the first payment.
Given the following information for Watson Power Co., ?nd the WACC. Assume the company’s tax rate is 35 percent. Debt: 10,000 6.4 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 108 percent of par; the bonds make..
You are given the following information for Watson Power Co. Assume the company’s tax rate is 40 percent. Debt: 8,000 6.3 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 106 percent of par; the bonds make semiann..
Firm A paid an end of year dividend of $3.75. For corporate investors with a tax rate of 35% and an exclusion rate of 70%, the after tax amount of the dividend is:
Suppose today is January 1, 2016; on January 1, 2006, XYZ industries issued a 30-year bond with a 5% coupon, paid semi-annually, and a $1,000 face value payable on January 1, 2036. The bond now sells for $975. Assume a 34% tax rate. Use this bond to ..
Explain the similarities and differences between net present value (NPV), profitability index (PI), and economic value added (EVA) and how can current risk and political risk be minimized when one is making a foreign direct investment?
What is the price of a STRIPS with a maturity of 9 years, a face value of $10,000, and a yield to maturity of 6.9 percent? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Toyohashi Co common stock has market price $85 per share and its sigma is 0.30. Find the value of a European put option, with an exercise price of $75 and expiring after 110 days, on the Toyohashi stock. The riskless rate is 3.5%.
Eurobonds pay interest annually. Suppose the annual coupon is 8 percent, the par value is $1,000, it matures in 6 years, and the current yield to maturity is also 8 percent. Calculate the duration of the bond. What is its modified duration?
Calculate the expected value of the short-term interest rate and calculate expected profit under each of the financial manager's three proposed financing plans
The contract size for platinum futures is 50 troy ounces. Sup-pose you need 300 troy ounces of platinum and the current futures price is $2,025 per ounce. How many contracts do you need to purchase? How much will you pay for your platinum? What is yo..
Discuss the criminal liability of David and Newtown Motor Co Ltd. What defences may be available to David and Newtown Motor Co Ltd if they are prosecuted? What advice would you give Newtown Motor Co Ltd to help it avoid prosecution in the future?
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