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Maritza has one share of stock and one bond. The total value of the two securities is 1,138 dollars. The bond has a YTM of 12.04 percent, a coupon rate of 11.46 percent, and a face value of 1,000 dollars; pays semi-annual coupons with the next one expected in 6 months; and matures in 12 years. The stock pays annual dividends and the next dividend is expected to be 7.85 dollars and paid in one year. The expected return for the stock is 14.01 percent. What is the price of the stock expected to be in 1 year?
Assume that most investors put together a well-diversified portfolio, and mangers manage in the interest of the well diversified shareholder. Should the manager be more interested in the diversifiable risk or non-diversifiable risk a project brings t..
A bank can borrow or lend at LIBOR. Suppose that the six-month rate is 5% and the nine-month rate is 6%. The rate that can be locked in for the period between six months and nine months using an FRA is 7%. What arbitrage opportunities are open to the..
Silver price today, December 7th, 2015 is $14.00/ounce. Each Futures contract has 5,000 ounces. Today’s interest rate for one-year rc = 5.00%. a. What is the Fair price of one Dec 7th 2016 silver futures contract? b. If the same silver contract is of..
Suppose that General Motors issued a bond with 10 years until maturity, a face value of $1,000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%. Assuming the yield to maturity remains constant, ..
MATURITY RISK PREMIUM The real risk-free rate is 3.4%, and inflation is expected to be 3.8% for the next 2 years. A 2-year Treasury security yields 7.8%. What is the maturity risk premium for the 2-year security?
Compute the future value of $5,000 deposited annually for 5 years, assuming a 10% annual interest rate compounded once a year. You may want to use the Excel function for computing the future value of an annuity or an FV table of factors. Explain the ..
You will receive a $100 annual perpetuity, the first payment to be received now, at Year 0, a $300 annual perpetuity payable starting at the end of Year 5, and a $200 semiannual (2 payments per year) perpetuity payable starting midway through year 10..
Devon lost his job as a logistics manager earning $65,000 a year when his former company downsized in 2011; however, he found a new job eight months later as a logistics supervisor for a small company in Jacksonville, Florida. Devon took a significan..
It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from customers. Cookie Cutter’s management is considering a lockbox system to reduce the firm’s collection times. What is the maximum monthly charge Cookie Cutte..
RedStone Mines stock returned 7.5, 15.3, -9.2, and 11.5 percent over the past four years, respectively. What is the geometric average return?
Explain the difference between bank credit risk and bank capital risk - What is the difference between lending to individual borrowers via a residential home mortgage compared to other types of consumer lending?
When computing estimated Capital Budgeting cash flows, you want the cash flow to be ____.
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