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A stock has a beta of 1.14, an expected return of 13.38 percent, and lies on the security market line. A risk-free asset is yielding 2.84 percent. Ferghus wants to create a $15,000 portfolio that is comprised of these two securities and that will have a portfolio beta of 0.79. What is the expected return (in percents) on this portfolio?
The CEO of a company with $44 million in equity and $66 million in debt is considering the purchase of a company jet that will impose a net cost on shareholders of $10 million, but which the CEO personally values at $500,000. How much stock (in dolla..
Firm A has a higher degree of business risk than Firm B. Firm A can offset this by using less financial leverage. Therefore, the variability of both firms' expected EBITs could actually be identical. _____ Pecking order theory states that firms use i..
What are the differences between foreign bonds and Eurobonds and why Eurobonds make up the lion’s share of the international bond market?
Assume that k* = 1.5; the maturity risk premium is found as MRP=0.09(t-1) where t= years to maturity; the default risk premium for Corporate bonds is found as DRP= 0.11% (t-1); the liquidity premium is 0.8; and inflation is expected to be 2% in years..
Bobcat Company, US-based manufacturer of industrial equipment, just purchased a Korean company that produces plastic nuts and bolts for heaby equipment. Bobcat can invest at the rates given above or borrow at 2% per annum above those rates. Bobcat's ..
A couple buys a house for $140,000. They pay 15% down and sign a 30 year mortgage at 5.2% compounded monthly. The first 5 years of this mortgage is an interest only loan where the payments are the interest on the principal. After 5 years, the princip..
If the current 180 day inter-bank Eurodollar rate is 15% (all rates are started on an annualized basis, and next period’s LIBOR is 13%, then a Eurocurrency loan priced at LIBOR plus 1% will cost. Suppose affiliate A sells goods worth $1 million month..
A U.S. Treasury bill with 75 days to maturity is quoted at a discount yield of 1.25 percent. What is the bond equivalent yield?
Seco Dame Enterprises (SDE) acquired a robotic saw six years ago at a cost of $10 million. Calculate the net investment required to acquire the new saw.
If both gambles offer you the same expected utility (i.e., the same expected satisfaction), what is the dollar amount of your risk premium?
The Cell Phone Shop sells protective covers for all the popular smart phone brands. The company has determined that it needs a 60% mark up on retail price in order to be profitable. It believes that this mark up will satisfy the company's profit obje..
Weiland Co. shows the following information on its 2014 income statement: sales = $162,500; costs = $80,000; other expenses = $3,300; depreciation expense = $9,000; interest expense = $6,500; taxes = $22,295; dividends = $8,150. In addition, you're t..
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