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Market A deals in low-risk securities with an average interest rate of 5%. Market B deals in high-risk securities with an average interest rate of 7%. Suddenly there is a financial crisis and the economy enters recession.
Before the recession, the risk premium for securities in Market A over securities in Market B was ____________ .
As a result of the recession, one would expect the demand for securities in Market A to _____________ and interest rates to _____________ .
A. There was no risk premium; rise; fall
B. 2%; rise; fall
C. 2%; fall; rise
D. There was no risk premium; fall; rise
Mary has earnings of $50,000 this year from her job. In addition, the market value of the condominium she owns increased from $100,000 to $105,000. She has no other capital gains or earnings, and receives no transfers. If Mary was subject to a compre..
A house painting business had revenues of $17,600 and expenses of $10,600 last summer. There were no depreciation expenses. However, the business reported the following changes in working capital:
Find the expected return and standard deviation of a portfolio that is invested 80% in Stock A and 20% in Stock B.
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What is the net present value of a project that has an initial cost of $89,000 and produces cash inflows of $21,000 a year for 7 years if the discount rate is 11.5 percent?
Karen Smith is in the 40 percent personal tax bracket. She is considering investing in HCA (taxable) bonds that carry a 12 percent interest rate. Suppose that Twin Memorial Hospital has issued tax-exempt bonds that have an interest rate of 6 percent...
Suppose you see the following rates in the marketplace: 10-year T-bond with a 4.56% yield, 10-year corporate bond with S&P rating of AAA with a 6.67% yield, and a 10-year corporate bond with S &P rating of BBB with an 8.32% yield. The difference is t..
Samir purchased a car for $40,000. He made a down payment of $18,000 and paid $694.47 monthly for 3 years. Find the APR from the table below. Finance charge per $100 of amount financed
You’ve borrowed $20,000 on margin to buy shares in Disney, which is now selling at $50 per share. Your account starts at the initial margin requirement of 50%. The maintenance margin is 35%. Two days later, the stock price falls to $48 per share. a. ..
What is the Over the Counter markets? What is the Leverage Ratio if Assets are $1000 and Capital is $150? Eurobank currently has $400 million in transaction deposits on its balance sheet. The current reserve requirement is 10%. What are the reserve a..
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