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1. A nominal interest rate is defined as "the opportunity cost of holding or using money." Explain what you understand this definition to mean.
2. When the economy is in a recession, the Federal Reserve usually cuts interest rates. Why would the federal government do this?
3. How does your saving and spending profile change depending on the state of the economy, i.e., whether the economy is in a recession versus expansion? Do interest rates play a role in your decisions? Why or why not?
4. If interest rates are at a level of 1% and expected inflation is 2%, would you prefer saving or spending your money? Justify your answer.
Choosing two of the following concepts, define each and explain how each could apply to personal financial and credit decisions.
· Anchoring
· Mental accounting
· Herd behavior
· Prospect theory
What happens to the bond’s coupon rate if the market yield on comparable debt drops from 7.2% to 6.8%?
Conventional cash flows are also known as non-simple cash flows. If the projects are independent, the AW at the MARR is calculated.
calculate the prices of six-month European call options with strike prices of $500, and $600.
What is the future value of $1,100, placed in a savings account for four years if the account pays 6.00%, compounded quarterly?
Your firm needs a machine which costs $230,000, and requires $44,000 in maintenance for each year of its 10 year life. After 5 years, this machine will be replaced. The machine falls into the MACRS 10-year class life category. Assume a tax rate of 40..
Consider the following information for three stocks, Stocks X,Y, and Z. The returns on the three stocks are positively correlated but are not perfectly correlated. Stock Expected Return Standard Deviation Beta. Fund Q has one-third of its funds inves..
Nodebt Inc. is a firm with all-equity financing. Its equity beta is .80. What is Nodebt’s asset beta? What is Nodebt’s WACC?
Is it better to purchase shares of stocks during a bear market or a bull market? Take a position and justify your answer as you explain each market.
What is the actual value of the IRR on the incremental cost?
If an asset is called derivative, what does that mean? Explain answer and give examples. Why is diversification in a stock portfolio important? Would diversification decrease all risk? Where can one find good estimates of current betas for real compa..
On March 16, the June T-bond futures contract was priced at 100 17/32 and the September contract was at 99 17/32. Determine the implied repo rate on the spread.
Penn Corp. is analyzing the possible acquisition of Teller Company. What is the cost of each alternative? What is the NPV of each alternative?
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