Risk is a major concern of almost all investors

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Reference no: EM1314842

Q. 1. Utilize the formula for perpetuity to compute the value of a preferred equity which pays 2percent (%) on a PAR value of $100 when the opportunity cost of investing in a similar instrument is 7percent (%). Elucidate how will the valuation changes if interest rates or the discount rate used rises or falls?

2. Utilize the formula for the present value of a bond to compute the bond price also value per $1,000 PAR amount for a bond with a 5percent (%) coupon also 10 yrs until maturity if the opportunity cost of investing in a similar bond is 3percent (%) or 7percent (%). Elucidate how would the valuation change if the yield curve steepened or if credit spreads widened?

3. 1-Risk is a major concern of almost all investors. When shareholders invest their money in a firm, they expect managers to take risks with those funds. Illustrate what do you think are the ethical limits which managers should observe when taking risks with other people's money?

4. Why managers should always have a fiduciary relationship with the investor.

Reference no: EM1314842

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