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1. If the nominal interest rate is 7% per year and the inflation rate is 2% per year, what is the exact real rate of return?
2. The inflation rate is 1.5% per year. The real rate of return is 2.0% per year. A perpetuity project that paid $100 this year will provide income that grows by the inflation rate. Show what this project is truly worth. Do this in both nominal and real terms. (Be clear on what never to do.)
You are planning to invest $2,500 today for three years at nominal interest rate of 9 percent with annual compounding. What would be the future value of your investment?
The following statement is true regarding depreciation:
Rick Rueta purchased a $77,000 home at 8.5% for 30 years with a down payment of $15,000. His annual real estate tax is $1,692 along with an annual insurance premium of $852. Rick’s bank requires that his monthly payment include an escrow deposit for ..
Colgate-palmolive company has just paid an annual dividend of $1.04. Analysts are predicting a(n) 11.9% year growth rate in earnings over the next five years. after that, colgates earnings are expetected to grow at the current industry average of 6.3..
The yield on a corporate bond is 9%, and it is currently selling at par. The marginal tax rate is 30%. A par value municipal bond with a coupon rate of 5.75% is available. Which provides a better return to the investor?
Curly’s Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $44,000 per year forever. A representative for Curly’s tells you the policy costs $690,000. At what interest rate would this be a fair deal?
Your company will generate $74,000 in annual revenue each year for the next seven years from a new information database. If the appropriate interest rate is 7.25 percent, what is the present value of the savings?
A firm issues the convertible debt shown above. The price of stock in this company on July 1, 2008 is $28.20. What is the minimum conversion ration that would make a bondholder prefer to convert rather than accept the call price?
Suppose a stock had an initial price of $57 per share, paid a dividend of $1.25 per share during the year, and had an ending share price of $73. Compute the percentage total return.
Calculate the return and risk of a two asset portfolio. Asset 1 has an annualized expected real return of 5.5% and a weight of 35% in the portfolio. Asset 2 has an annualized expected real rate of return of 2.0% and a weight of 40% in the portfolio.
The risk-free rate of return is 4%, the required rate of return on the market is 10%, and High-Flyer stock has a beta coefficient of 2.0. If the dividend per share expected during the coming year, D1, is $4.60 and g = 6%, at what price should a share..
Which one of the following is a use of cash?
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