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Suppose that there are only two stocks in the stock market. Stock A sells for $20 and has 100 shares outstanding. Stock B sells for $40 and has 200 shares outstanding. Assume that there is a risk-free asset.
a. What is the market portfolio in this hypothetical economy?
b. If the beta of stock A is 1.2, what is the beta of stock B?
c. If the stocks have volatilities 20% and 30%, and if all investors have quadratic utility so that the CAPM accurately describes the data being used, what is the equilibrium expected return (or equilibrium expected return or the CAPM implied expected return as practitioners call it) on the stocks in excess of the risk-free asset?
bank enters into an interest rate swap with a nonfinancial counterparty using bilaterally clearing
Company A's historical returns for the past three years are: 6.0%, 15%, and 15%. Similarly, the market portfolio's returns were: 10%, 10%, and 16%. Suppose the risk-free rate of return is 4%. What is the cost of equity capital (required rate of retur..
Landmark Coal operates a mine. During July, the company obtained 500 tons of ore, which yielded 250 pounds of gold and 63,700 pounds of copper. The joint cost related to the operation was $500,000. Gold sells for $325 per ounce and copper sells for $..
The yield to maturity on these bonds is 3.3 percent and the bonds have a par value of $5,000. What is the price of the bonds
The stock is currently selling at $10.00 a share. What is your firm’s cost of equity?
Determine the future value of $1500 in twenty-five years with a market interest rate of 6%.
What is the value to the firm of a well-prepared capital budget? Why do firms need them?
What discount rate or WACC should they use ?
The MoMi Corporation’s cash flow from operations before interest and taxes was $5.4 million in year, Use the free cash flow approach to value the firm’s equity.
It is July 2011. A mining company has just discovered a small deposit of gold. It will take six months to construct the mine.
What is the balance remaining to pay on the loan after two years?
Consider the following collection of n=9 closing for stock ABC: 101.02, 102.23, 100.34, 99.87, 98.65, 96.45, 98.45, 99.00, 100.05. Compute the standard estimator of the volatility parameter σ using these closing prices.
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