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You are in the market for a used car and see an ad for the model that you like. The owner has not set a price but invites potential buyers to make offers.
Your prepurchase inspection gives you only a very rough idea of the value of the car; you think it is equally likely to be anywhere in the range of $1,000 to $5,000 (so your calculation of the average of this value is $3,000).
The current owner knows the exact value and will accept your offer if it exceeds that value. If your offer is accepted and you get the car, then you will find out the truth.
But you have some special repair skills and know that, when you own the car, you will be able to work on it and increase its value by a third (33.3 . . . %) of whatever it is worth.
(a) What is your expected profit if you offer $3,000? Should you make such an offer?
(b) What is the highest offer that you can make without losing money on the deal?
Ruth Hornsby is looking to invest in a three-year bond that makes semiannual coupon payments at a rate of 5.625 percent. If these bonds have a market price of $980.13, what yield to maturity and effective annual yield can she expect to earn?
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CRN33235 - Explain what you understand by the term credit risk. Discuss the alternative methodologies which have been proposed to measure credit risk. Your discussion should include the limitations of each approach.
net present value npvproblem 11-1npvproject k costs 40000 its expected cash inflows are 12000 per year for 6 years and
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Calculate Expected Cash Flows, NPV, and Present Value for opening a UPS Store Franchise. Specifically calculate the following: Expected cash flows given forecasted profit. Present value and net present value
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The Dallas/Fort Worth International Airport would like to buy the option to purchase a large parcel of land on the edge of the city of Grapevine from a real estate investor. what is the fair market value of the option?
Your pension plan is an annuity with a guaranteed return of 4% per year (compounded quarterly). You can afford to put $1,800 per quarter into the fund, and you will work for 40 years before retiring. After you retire, you will be paid a quarterly pen..
The closest approximation to the real, risk-free rate of interest is
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