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Interest rate fundamentals: The real rate of return Carl Foster, a trainee at an investment banking firm, is trying to get an idea of what real rate of return investors are expecting in todays marketplace. He has looked up the rate paid on 3 month U.S. treasury Bills and found it to be 5.5%. He has decided t use the rate of change in the Consumer Price index as a proxy for the inflationary expectations of investors. The annualized rate now stands at 3%. On the basis of the information that Carl has collected, what estimate can he make of the real rate of return?
The treasurer of Harmon Bottling Corporation currently has $100,000 invested in preferred stock yielding 9 percent. He appreciates tax advantages of preferred stock and is planning buying $100,000 more with borrowed funds.
A self-employed person deposits $3,000 annually in a retirement account (called a Keogh account) that earns 8 percent.
Explain what is the actual rate the payday loan business is charging on its loans?
Analyze the numbers given in the case. Make sure that you understand which numbers represent costs and which represent receipts. Also note the inflation assumption, which can be dealt with in either of two ways (which you use is your choice).
Everest, Inc.'s preferred stock has a par value of $1,000 and a dividend equal to 13.0% of the par value. The stock is currently selling for $907.00.
Evaluate the forward discount or premium for the Mexican peso whose 90-day forward rate is $.102 and spot rate is $.10. State whether your answer is a discount or premium.
What is the present value of an annuity of $4000 received at the beginning of each year for the next eight years?The first payment will be received today and the discount rate is 9%.
Suppose a stock had an initial price of $80 per share, paid a dividend of $1.35 per share during the year, and had an ending share price of $87. What was the capital gains yield?
Objective type questions on bond valuation and An increase in the level of wealth in the economy
What is the value today of a 10,000 payment made in perpetuity assuming a 8% discount rate?
A 8.1 percent coupon bond with 17 years left to maturity is priced to offer a 6.55 percent yield to maturity. You believe that in one year, the yield to maturity will be 7.2 percent.
Robert has been investing $1000 at the end of each year for the past 15 years. How much has accumulated, assuming he has earned 9% compounded annually on his investment?
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