What rate would you expect to receive

Assignment Help Financial Management

Reference no: EM131907226

1.) Suppose you have two investment options: a corporate bond with a 7% annual coupon payment or a municipal bond with a 6% annual coupon payment. If your tax rate was 25% which bond would you invest in? Show your work.

2.) There have been a few times in U.S. history when the return on a short-term bond has been lower than the return on a long-term bond (the yield curve is downward sloping). Explain why this occurs.

3.) The following table shows the estimated yearly T-bill rate for the next several years. If you purchased a 4-year government bond what rate would you expect to receive? A 2-year government bond? Show your work.

Year	1-Year Rate	Liquidity Premium
2017	2%	0%
2018	2.3%	.25%
2019	2.7%	.25%
2020	3%	.5%

4.) Suppose you read in the Wall Street Journal that the price of GE is expected to increase in the future. Should you invest in GE (will you be able to achieve an abnormal profit)? Why or Why not?

5.) We talked about several anomalies in class (momentum, January, weekend, P/E, B/M, earnings surprise, small firm, neglected firm). Use the internet to search for another anomaly that conflicts with EMH. Briefly, explain what the anomaly is and how you would receive abnormal returns. Have any explanations been found for why the anomaly exists or does it weaken the efficient market hypothesis?

6.) The news has recently suggested that stock prices are much higher than they should be given future growth estimates. Do you think the news is correct and many stocks are currently overpriced or are they accurately priced? Provide at least two reasons to support your answer. How does your answer relate to the efficient market hypothesis?

Reference no: EM131907226

Questions Cloud

Define congruence and compare with equality : Define congruence and compare with equality. Which algorithm is used to find the multiplicative inverse of an integer in Zn?

Determine the price of a three year bond issued : Determine the price of a 3 year bond issued by i) Disney (spread 0,5%), ii) Boeing (spread 1%) and iii) InfoSoft (spread 2%) taking into account.

What is a linear diophantine equation of two variables : What is a linear Diophantine equation of two variables? How many solutions can such an equation have? How can the solutions) be found?

Define the greatest common divisor of two integers : Define the greatest common divisor of two integers. Which algorithm can effectively find the greatest common divisor?

What rate would you expect to receive : Suppose you read in the Wall Street Journal that the price of GE is expected to increase in the future. Should you invest in GE ?

Show how ip sec reacts to a brute-force attack : Show how IP Sec reacts to a brute-force attack. That is, can an intruder do an exhaustive computer search to find the encryption key for IP Sec?

Calculate the payback period and irr : Suppose you have an investment opportunity that requires a $40,000 initial investment, but will repay you $20,000 over each of the next three years.

How ike reacts to the replay attack in the aggressive mode : Show how IKE reacts to the replay attack in the aggressive mode. That is, show how IKE responds to an attacker that tries to replay one or more messages.

What is the capital gains yield : Suppose a stock had an initial price of $77 per share, paid a dividend of $1.05 per share during the year, and had an ending share price of $83.

User Account

All Pages