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Riskless asset and risky portfolio
Consider a risk portfolio. The end-of-year cash flow derived from the portfolio will be either $50,000 or $120,000, with equal probabilities of 0.5. The alternative riskless investment in T-bills pays 5%.
A. Now suppose you require a risk premium of 15%. What is the price you will be willing today?
B. What do you conclude about the relationship between the required risk premium on a portfolio and the price at which the portfolio will sell?
After you finished building your baseline budget for the conference facility project, you need to plan how you want to manage your budget. That includes writing a cost management plan, which provides the report formats, variance reporting thresholds,..
You purchased one of Big Corp.’s 8%, 10-year convertible bonds at its $1,000 par value a year ago when the company’s common stock was selling for $20. Similar bonds without a conversion feature returned 12% at the time. The bond is convertible into s..
A mining company is considering a new project. Because the mine has received a permit, the project would be legal; but it would cause significant harm to a nearby river. Calculate the NPV and IRR with mitigation. Under the assumption that all costs h..
You are considering a project which will provide annual cash inflows of $4,500, $5,700, and $8,000 at the end of each year for the next three years, respectively.- What is the present value of these cash flows, given a 9 percent discount rate?
Ten-year zero coupon bonds issued by the U.S. Treasury have a face value of $1,000 and interest is compounded semiannually. If similar bonds in the market yield 9.59 percent, what is the value of these bonds?
Assume for simplicity that the contract between firm 1's investors and the entrepreneur can be contingent on the realization of ρ0. Show that at the optimal contract assets are resold.
The 6-month, 1-yr, 1.5-yr, and 2-yr interest rates are 1.75%, 2.00%, 2.25% and 2.50% with continuous compounding. a. Calculate the present value of $100 in 1.5 years (=18 months). Suppose a bank needs to borrow (not lend) $20 million for 3 months sta..
Calculate the current spread of Aaa- and Baa-rated corporate bonds over the 10-year T-bond rate.How have these spreads changed over the last two years? The cost of this bond is what percentage? Price $1,249.00; Coupon 8%; Yield 9%; tax rate 31%. Expl..
The founders of the New York Stock Exchange took inspiration from which country's stock market?
You invested in long-term corporate bonds and earned 6.1 percent. During that same time period, large-company stocks returned 12.6 percent, long-term government bonds returned 5.7 percent, U.S. Treasury bills returned 4.2 percent, and inflation avera..
The Markley Company has 3 million shares of stock outstanding. The stock has a par value of $2 per share, and is currently trading at $45 per share. According to this information, the market value (or market cap) of Markley is a.
Mr. Nailor invests $6,000 in a money market account at his local bank. He receives annual interest of 8% for 7 years. How much return will his investment earn during this time period? (Compound monthly)
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