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Green Devil Corporation stock, of which you own 100 shares, will pay a $2 per share dividend one year from today. Two years from now Green Devil will close its doors and stockholders will receive a liquidating dividend of $ 11 per share. The required rate of return on Green Devil stock is 10 percent.
(a) What is the current price of Green Devil stock?
(b) If you prefer to receive $5 per share dividend (total $500 cash) one year from today, how can you receive the desired amount of cash flow? Explain your strategy.
(c) If you prefer to receive equal amounts of money in each of the next two years, how can you accomplish this? Explain your strategy.
A stock has a beta of 1.25 and an expected return of 12.3 percent. A risk-free asset currently earns 4.05 percent. Required: (a) What is the expected return on a portfolio that is equally invested in the two assets? If a portfolio of the two assets h..
A 150% local currency return in Brazil is higher than a 15% dollar return in the U.S. If annualized interest rates in the U.S. and Sweden are 9% and 13%, respectively, and the spot value of the Swedish krona is $.1090, then at what 180 day forward ra..
The common stock and debt of Northern Sludge are valued at $56 million and $44 million, respectively. Investors currently require a return of 16.8% on the common stock and 6.9% on the debt. If Northern Sludge issues an additional $20 million of commo..
If Treasury bills are currently paying 2.74 percent and the inflation rate is 1.43 percent, what is the approximate real rate of interest?
A loan of $39, 999.85 is to be repaid by payments at the end of each quarter for eight years. the amount of principal in the twentieth payment.
Compute the price of a 6.25 percent coupon bond with 15 years left to maturity and a market interest rate of 5 percent. The bond was sold at a par value of $1000. Assuming the interest payments are semi-annual is this a discount or premium bond?
Bruce receives 20 stock rights in a nontaxable distribution. The stock rights have a FMV of $5,000. The 100 shares of common stock with respect to which the rights were issued have a basis of $14,000 and a FMV of $30,000. What is the adjusted basis o..
U.S. Treasuries are never subject to interest rate risk unless we select a maturity equal to our investment horizon. Many practitioners analyze other financial characteristics of a firm, when they forecast betas. When using historical returns to fore..
Which if the following is an example of expropriation:
Holtzman Clothiers’s stock currently sells for $38.00 a share. It just paid a dividend of $2.00 a share (i.e., D(0) = $2.00). The dividend is expected to grow at a constant rate of 5% a year. What stock price is expected 1 year from now? What is requ..
A 7 percent coupon bond with 8 years left to maturity is priced to offer a 7.75 percent yield to maturity. You believe that in one year the yield to maturity will be 7.4 percent. What is the change in price the bond will experience in Dollars?
Personal Finance: Why should you be concerned with retirement and estate?
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