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1. What is risk? What two factors are important in determining the degree of risk?
2. Both investing and gambling can be defined as "undertaking risk in order to earn a profit." Explain how these two activities are different and why society generally takes a more favorable view of investing compared to gambling.
3. Explain the concept of correlation. If two securities have a high positive correlation, what does that mean? Give an example of two securities that might be highly correlated. If two securities have a low positive correlation, what does this mean? Give an example of two securities that might have a low positive correlation. If two securities are negatively correlated, what does that mean? Give an example of two securities that might be negatively correlated.
4. What kind of risk do standard deviation and beta measure? Explain.
Why is knowledge of finance important in running of organizations?
New stock can be sold to the public at the current price, but a flotation cost of 8% would be incurred. What is the company's cost of newly issued equity?
Ashes Divide Corporation has bonds on the market with 18 years to maturity, a YTM of 6.4 percent, and a current price of $1,266.50. The bonds make semiannual payments. What must the coupon rate be on these bonds?
The Chicken Coup Restaurant is expected to pay an annual dividend of $2.20 a share next year. The company recently announced that future dividends will increase by 2.8 percent annually. The current market price is $33.60 a share. What is the cost ..
problem 1bond abond bunitmaturity47yearscoupon56annualprice101.79102.85-you know for certain that the 3 year rate in 4
Find out how much you will have accumulated in the account at the end of (1) 3 years (2) 6 years and (3) 9 years. Use your findings in part A to calculate the amount of interest earned in (1) the first 3 years (years 1 to 3), (2) the second 3 years (..
Determine what factors would cause a difference in the use of financial leverage for a utility corporationand an automobile company?
Explain why understanding the time value of money is important to investors. Explain the risk for investors in not understanding the time value of money.
If the market premium is 11.38 percent, the risk-free rate is 4.19 percent, the inflation rate is 2.67 percent, and Middlefield Motors common stock has a beta.
One year later, when yields have fallen to 2%, she collects the annual coupon and sells the bond. What is her holding period return for the year?
Show how Eastern Trading can use multilateral netting to minimize the foreign exchange transactions necessary to settle interaffiliate payments. If foreign exchange transactions cost the company .5 percent, what savings result from netting?
Spiro Savings Bank currently holds a government bond valued on the day of its purchase at S5 million, with a promised interest yield of 6 percent.
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