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Economics Homework - Money and Banking
Problem 1 - For $9,800 you purchase a T-bill that will pay $10,000 in 76 days. What is your yield to maturity? If the rate of inflation during this period is 5%, what is your real rate of return? Be sure both to show how you calculated your answers and to define all the variables in any mathematical equation you use. If prevailing nominal rates of interest hover around 8%, would this be a lucrative purchase? If you make this purchase, have you invested in the money market or the capital market?
Problem 2 - You have a choice between a financial instrument that pays $11,500 one year from now and another that pays $14,000 five years from today. If the market rate of interest is 7 percent, which instrument has the higher present value? Which should you be willing to pay more for? Be sure both to show how you calculated your answer and to define all the variables in any mathematical equation you use.
Problem 3 - What is the value of a consol (perpetuity) that promises to pay $120 per year if the market rate of interest is (a) 3 percent, (b) 6 percent, and (c) 12 percent? Be sure both to show how you calculate your answers and to define all variables in any mathematical equation you use. If you do purchase the consol, have you invested in the money market or the capital market?
The three homework problems involving the formulas for calculating yield that we went over in class. Each is worth one-half point extra credit. But in order to get credit, you not only must correctly answer all parts of the question but you also must show your work. This includes giving the general mathematical equation you used and defining all variables. You should make two copies of your answers: one to hand in at the beginning of class; the other to have as I go over the problems in class.
If Integrated Devices decides to continue using Trexler as a supplier, what must both companies do to begin improving Trexler's component quality?
What is the mission of an effective disaster communications strategy?- What are the five critical assumptions of an effective disaster communications strategy?
Floral Bouquet needs to raise $21 million to expand its operations nationally. The company will sell new shares of common stock using a general cash offering. The underwriters charge an 8 percent spread.
The largest bank serving the company's local business community is currently offering an interest rate of 5.5% on three- year CD's. The bank pays interest on it CD's to depositors annually.
Technical Sales, Inc. has 6.6 percent coupon bonds on the market with 9 years left to maturity. The bonds make semiannual payments and currently sell for 92.5 percent of par.
In discussions with its investment bank, DiPitro's learns that the bankers recommend a gross price of $44 per share and that 70,000 shares of stock be sold. The net proceeds on the stock sale leaves DiPitro's with $2.870 million.
The next dividend payment by Wyatt, Inc., will be $2.30 per share. The dividends are anticipated to maintain a growth rate of 4.5 percent forever.
What percentage of all disaster-related injuries and deaths are sustained in countries with per-capita income levels below $760 per year?
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What is the correlation between the S&P 500 index (measured in dollars) and the FTSE 100 index when it is translated to dollars?
A project has a WACC of 8% and an initial cash outlay of $1000. The life of this project is 4 years and cash flows are expected to be $400 per year.
A firms reports that in a certain year it had a net income of 4.5 million, depreciation expenses of 2.8 million, capital expenditures of 2.3 million, and Net Working Capital decreased by 1.5 million.
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