What is the customers expected return if she borrows money

Assignment Help Finance Basics
Reference no: EM13891862

A broker wants to sell a customer an investment costing $100 with an expected payoff in one year of $106. The customer indicates that a 6 percent return is not very attractive. The broker responds by sug- gesting the customer borrow $90 for one year at 4 percent interest to help pay for the investment.

a. What is the customer's expected return if she borrows the money?

b. Does borrowing the money make the investment more attractive?

c. What does the Irrelevance Proposition say about whether borrow- ing the money makes the investment more attractive?

Reference no: EM13891862

Questions Cloud

What inflation rate is expected during year : Assume that the real risk free rate is 2% and that the maturity risk is zero. If a 1-year Treasury bond yield is 5% and a 2-year Treasury bond yield is 5% and a 2-year Treasury bond yields 7%, what is the 1-year interest rate that is expected for yea..
A local finance company quotes an interest rate : A local finance company quotes an interest rate of 19.7 percent on one-year loans. So, if you borrow $47,000, the interest for the year will be $9,259. Because you must repay a total of $56,259 in one year, the finance company requires you to pay $56..
Finite complement topology : X and Y are sets. ζu refers to the usual topology, ζH is the half-open interval topology. ζC is the open half-line topology, ζF is the finite complement topology and ζcc. is the countable complement topology. R is the set of real numbers, Z is the ..
Analyze the rhetorical strategies of ethos : Analyze the rhetorical strategies of ethos
What is the customers expected return if she borrows money : What is the customer's expected return if she borrows the money? Does borrowing the money make the investment more attractive?
Mutual reflection and mutual understanding as it relates : mutual reflection and mutual understanding as it relates to cultural differences.
What will the annual dividend payout ratio be : According to this forecast, what dividends will the company be able to distribute annually without raising new equity? What will the annual dividend payout ratio be?
Effect of healthcare reform on access, cost, and quality : The new healthcare law has been in the news as of late. It was hailed by some as the end all be all for healthcare. It was supposed to allow more people access to care. It was supposed to reduce the cost of care, which is skyrocketing.
Ealuate the social determinants that may impact current : Ealuate the social determinants that may impact current public health issues within the U.S

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the depreciation tax shield for this project

Assume a tax rate of 35% and a discount rate of 15%. What is the depreciation tax shield for this project in year 3?

  Cost of goods sold holliman corp has current liabilities

cost of goods sold holliman corp. has current liabilities of 410000 a quick ratio of 1.8 inventory turnover of 4.2 and

  Select a data collection questionnaire or tool that has

select a data collection questionnaire or tool that has been designed by a healthcare organization to obtain feedback

  Find the penalty griff will pay

Griff's property tax is $670.64 and is due April 10. He does not pay until June 21. The county adds a penalty of 7.5% simple interest on unpaid tax. Find the penalty Griff will pay. (Assume there are 365 days in a year.)

  Show keystrokes for the ti ba ii plus financial calculator

Please show keystrokes for the TI BA II Plus financial calculator. Thanks ( I'n not sure how to enter the payment that is to be made immediately)

  This preferred stock is currently selling for 5646 per

boyer corp. has outstanding borrowings. one of these borrowings is nonconvertible preferred stock cumulative with a par

  Calculate the sharpe ratio-treynor ratio

Calculate the Sharpe ratio, Treynor ratio, Jensen's alpha, information ratio, and R-squared for both funds and determine which is the best choice for your portfolio.

  Determine how international funds have been performing in

a distinguish between international funds global funds worldwide funds and overseas funds.b determine how

  Suppose you invest equal amounts in a portfolio with an

suppose you invest equal amounts in a portfolio with an expected return of 16 and a standard deviation of returns of 20

  United-continental airline merger

Research United and Continental Airline merger, measure the challenges experienced during the merger and resulting impact to the business.

  Amazoncom stock prices gave a realized return of 5 -5 10

amazon.com stock prices gave a realized return of 5 -5 10 and -10 over four successive quarters. what is the annual

  Elmer was an extremely diligent employee this year and his

identify the amount if any that these individuals must include in gross income in the following independent cases.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd