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Stocks A and B have the following data. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?
A B Required return 10% 12%
Market price $25 $40
Expected growth 7% 9%
a.These two stocks should have the same expected return.
b.These two stocks should have the same price.
c.These two stocks must have the same expected capital gains yield.
d.These two stocks must have the same dividend yield.
Compute the risk premium for the stock of Omega Tools if the risk free rate is 6%, the expected market return is 12%, and Omega's stock has a beta of .8.
Calculate the yield to maturity on the following bonds. A 8.5 percent coupon (paid semiannually) bond, with a $1,000 face value and 25 years remaining to maturity. The bond is selling at $910. An 5.6 percent coupon (paid quarterly) bond, with a $1,00..
Suppose you write 25 put option contracts with a $45 strike. The premium is $3.80. Evaluate your potential gains and losses at option expiration for stock prices of $35, $45, and $55
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An investment offers $6,100 per year for 15 years, with the first payment occurring one year from now. If the required return is 6 percent, what is the value of the investment? What would the value be if the payments occurred for 40 years? For 75 yea..
Consider defined-benefit retirement plans and defined-contribution retirement plans and document the primary characteristics of each. Specifically, contrast the responsibilities of the employer in administering each plan. Which plan is more risky for..
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please read the case revaluing the chinese yuan and respond to this question 1-do you believe that the revaluation of
Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the average return on the portfolio during this period? Year rA rB 2009 -30.00% -7.50% 2010 63.00% 22.50% 2011 30.00% -19.50% 2012 -12.00% 75.00% 2..
Romo Enterprises needs someone to supply it with 121,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $880,000 to install the equipment nec..
How does a leveraged buyout work? What does the debt structure of the firm normally look like after a leveraged buyout? What might be done to reduce the debt?
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