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A stock has a beta of 1.10, an expected return of 12.11 percent, and lies on the security market line. A risk-free asset is yielding 3.2 percent. You want to create a portfolio valued at $12,000 consisting of Stock A and the risk-free security such that the portfolio beta is .80. What rate of return should you expect to earn on your portfolio?
9.41 percent
9.68 percent
9.16 percent
9.33 percent
9.56 percent
You can purchase a building for $375,000. The Investment will generate $25,000 in cash flows during the first three years. At the end of the three years you will sell this building for $450,000. What is the IRR on this investment? Is it possible to u..
The president of Lowell Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $60,000, and it falls into the MACRS 3-year class (33% in year 1, 45% in year 2, 15% in year 3, and 7% in year 4). The firm's m..
Great Lakes Packing has two bond issues outstanding. The first issue has a coupon rate of8 percent, matures in 6 years, has a total face value of $5 million, and is quoted at 101.2 percent of face value. What is the firm's weighted average after tax ..
Jones Design wishes to estimate the value of its outstanding preferred stock. The preferred stock issue has an $120 par value and pays an annual dividend of $6.20 per share. Similar-risk preferred stocks are currently earning a 7.4% annual rate of re..
Today’s price of a 3-month t-bill futures is 958500. Today, the spot price of a 6-month t-bill is $940000. What is the implied repo rate? In addition to the information in the above assume a trader can actually borrow at a repo rate of 6% p.a. Show h..
You are evaluating two different silicon wafer milling machines. The Techron I costs $261,000, has a three-year life, and has pretax operating costs of $70,000 per year. The Techron II costs $455,000, has a five-year life, and has pretax operating co..
Best Lodging has $1,000 face value bonds outstanding. These bonds pay interest semiannually, mature in 5 years, and have a 6 percent coupon. The current price is quoted at 101. What is the yield to maturity?
Which of the following statements about internal rate of return is true?
Jack purchased a new home for $75,000. He paid $20,000 down and agreed to pay the rest in 20 equal annual payments, which include the principal payment plus 9% compound interest; payments are made at the end of the year. What will the payments be?
Firms with more liquid assets, which tend to have lower bankruptcy costs, tend to use less debt. If changes in the bankruptcy code make bankruptcy less costly to corporations, then this would likely reduce the debt ratio of the average corporation.
Assume that your opportunity cost of capital is 7% per year. At what rate of capital appreciation would the NPV be zero if you resold the house after 1 year?
A firm has 160,000 shares of stock outstanding, sales of $1.94 million, net income of $126,400, a price-earnings ratio of 21.3, and a book value per share of $7.92. What is the market-to-book ratio?
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