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The market price of a security is $25. Its expected rate of return is 12%. The risk-free rate is 4% and the market risk premium is 6.0%. What will be the market price of the security if its correlation coefficient with the market portfolio doubles (and all other variables remain unchanged)? Assume that the stock is expected to pay a constant dividend in perpetuity. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.) Market price $
Developing good note-taking and paraphrasing strategies, to effectively summarize academic resources, is a difficult process for students to learn.’ Students should be able to locate, paraphrase, summarise and comprehend simple to complex English tex..
We are evaluating a project that costs $573,000, has a six-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 75,000 units per year. Price per unit is $46, varia..
Vandelay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,066,000 and will last for six years. Variable costs are 40 percent of sales, and fixed costs are $210,000 per year. Machine B costs $5,25..
A Japanese corporation has purchased currency call options for a premium of 4 yen per unit and the exercise price of the option is 101.34 yen per dollar.
Tarawa Limited issued $1,390,000 of 10-year, 5% bonds on January 1, 2015, at a price to yield a market interest rate of 8%. Calculate the bonds’ present value.
The net present value is equal to. Investment proposals are mutually exclusive if acceptance of one forces the investor to accept the other.
Drongo Corporation's 5-year bonds yield 7.96%. The real risk-free rate is 2.74%. The maturity risk premium is estimated to be 0.13%(t-1), where t is equal to the time to maturity. If the average inflation rate is expected to be 5.8% for years subsequ..
For a project with no negative future outflows the discounted payback period cannot be shorter than the accounting (non-discounted) payback period. Assume Rodriquez Inc. has a 5-year maturity non-convertible zero coupon bond. If interest rates fall b..
Find the new cost of equity if they changed to using a capital structure that used 40% debt and 60% equity.
Calstar's outstanding common stock is currently worth $50,000. Calstar management owns approximately 45% of the currently outstanding common stock.
Extra Co. maintains a debt-equity ratio of 1 and has a tax rate of 40 percent. The firm does not issue preferred stock. The cost of equity is 12 percent and the before tax cost of debt is 15 percent. What is Abco’s weighted average cost of capital?
Discuss the role of a third party intermediary in an interest rate swap agreement. Describe the risks assumed by the intermediary. How does the intermediary potentially profit from this activity?
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