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Assume these are the stock market and Treasury bill returns for a 5-year period: Year Stock Market Return T-Bill Return Year 1 ? 34.73 3.70 Year 2 31.30 .10 Year 3 14.96 .24 Year 4 2.78 .09 Year 5 19.06 .11
a. What was the risk premium on common stock in each year? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Year Risk premium Year 1 % Year 2 % Year 3 % Year 4 % Year 5 %
b. What was the average risk premium? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Average risk premium %
c. What was the standard deviation of the risk premium? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) '
Standard deviation %
Falcon Ridge Developers wants to compute the firm’s WACC for capital budgeting purposes. The firm uses 30% debt, 20% preferred stock and the remainder is in equity. The YTM on the firm’s debt is currently 4.5% and the firm’s marginal tax rate is 40%...
Calculate the price of a zero coupon bond that matures in 16 years if the market interest rate is 3.6 percent.
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Which of the following statements regarding the beta of these stocks would be true?
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XYZ has a target capital structure of 31 percent common equity and the rest long term debt.
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