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A particular security's equilibrium rate of return is 9%. For all securities, the inflation risk premium is 2.75 percent and the real interest rate is 3 percent. The security's liquidity risk premium is .50 percent and maturity risk premium is .75 percent. The security has no special covenants. What is the security's default risk premium?
Hint: i* = IP + RIR + DRP + LRP + SCP + MRP
Explain precisely what expectations are consistent with selling the December 2014 Eurodollar futures contract to make a profit. Explain precisely what rate expectations are consistent with buying the December 2014 Eurodollar futures contract to make ..
Lisa Sweet, the CEO of Digital Storage Devices has been granted options on 300,000 shares. The stock is currently trading at $27 a share and the options are at the money. The volatility of the stock has been about .15 on an annual basis over the last..
A call on Ava Inc. with an exercise price of $65 and one year till maturity is selling for $7. A put on Ava with an exercise price of $65 and one year till expiration is selling for $6.5. If the risk-free rate is 9%, what is the stock price today? A ..
A firm's credit policy consists of which of the following items?
The following defined pension data of Marin Corp. apply to the year 2017. Projected benefit obligation, prepare a pension worksheet for Marin Corp.
Speedy Auto Parts is considering a merger with Freeman Car Parts. Freeman's market-determined beta is 0.9, and the firm currently is financed with 20% debt, at an interest rate of 8%, and its tax rate is 25%. Calculate the current required return to ..
Suppose a forecasting service predicts that the one-year interest rate four years from now will be 5.00%.Based on this forecast, ascertain what the five-year spot yield must be if bond prices permit no arbitrage
when the current market rate for similar risk bonds is 11.2%.
You are considering investing $1,000 in a T-bill that pays 0.05 and a risky portfolio, P, constructed with 2 risky securities, X and Y. The weights of X and Y in P are 0.60 and 0.40, respectively. X has an expected rate of return of 0.14 and variance..
Calculate the companys overall cost of capital - What happens to the cost of equity as more debt gets used relative to equity?
Wildcat, Inc., has estimated sales (in millions) for the next four quarters as follows: Q1 Q2 Q3 Q4 Sales $ 120 $ 140 $ 160 $ 190 Sales for the first quarter of the year after this one are projected at $135 million. Accounts receivable at the beginni..
what portion of its net income is the firm expected to pay out as dividends? What is the company's expected growth rate?
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