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Which statement is NOT true of The Capital Asset Pricing Model (CAPM):
A. CAPM defines required return for a level of risk
b. CAPM implies that the market will not compensate investors for the total risk.
c. CAPM is a linear function, the “Security Market Line.”
d. CAPM is a one-factor arbitrage pricing model.
e. CAPM is a good predictor of returns on an individual security.
You purchased a zero-coupon bond one year ago for $277.33. The market interest rate is now 8 percent. Required: If the bond had 17 years to maturity when you originally purchased it, what was your total return for the past year?
Corporate income tax/ Meyer Inc has taxable income (earnings before taxes) of 300,000. Calcualte Meyer's federal income tax liability using the tax table . What are the firm's average and marginal taxes?
Backwater Corp. has 10 percent coupon bonds making annual payments with a YTM of 9.2 percent. The current yield on these bonds is 9.55 percent. How many years do these bonds have left until they mature?
Sally Gomez is interested in starting a new business. Although Gomez has developed her business plan and is ready to implement her ideas, she lacks the necessary finances to begin her new business. Along with a lack of finances, Gomez worries about t..
Your firm needs to raise $100 million in funds. You can borrow short-term at a spread of 1% over LIBOR. Alternatively, you can issue 10-year, fixed-rate bonds at a spread of 2.50% over 10-year treasuries, which currently yield 7.60%. Current 10-year ..
The Sleeping Flower Co. has earnings of $2.30 per share. The benchmark PE for the company is 16. What stock price would you consider appropriate? (Round your answer to 2 decimal places. (e.g., 32.16)) Stock price $ What if the benchmark PE were 19? (..
Fly Away, Inc., has balance sheet equity of $6.6 million. At the same time, the income statement shows net income of $798,600. The company paid dividends of $403,293 and has 100,000 shares of stock outstanding. If the benchmark PE ratio is 30, what i..
Upon hearing that you were thinking about delaying the wedding a year, your future spouse goes bonkers. You decide to offer an alternative, to get married as soon as the $25,000 wedding costs are saved and borrow to pay for the honeymoon ($10,000) wi..
Wu Corporation has been offered a loan of $1,000,000 at a rate of 8.5%, simple interest, with monthly interest payments and a 365-day year. What would the effective interest rate be on this loan? If Wu's $1,000,000 loan had been 8.5%, add-on, payable..
Seven years ago, Goodwynn & Wolf Incorporated sold a 20 year old bond issue with a 14% annual coupon rate and a 9% call premium. Today, G&W called the bonds. The bonds originally were sold at their face value of $1,000. Compute the realized rate of r..
One year ago, the Jenkins Family Fun Center deposited $4,800 in an investment account for the purpose of buying new equipment four years from today. Today, they are adding another $6,600 to this account. They plan on making a final deposit of $8,800 ..
Sioux Financial Corp. has forecasted its bond portfolio value for one year ahead to be $105 million. In one year, it expects to receive $10,000,000 in coupon payments. The bond portfolio today is worth $101 million. What is the forecasted return of t..
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