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Consider the following data for a one-factor economy. All portfolios are well diversified.
Portfolio
E(r)
Beta
A
16%
1.6
F
8%
0.0
Suppose that another portfolio, portfolio E, is well diversified with a beta of .4 and expected return of 9%. Would an arbitrage opportunity exist? If so, what would be the arbitrage strategy?
Bond J has a coupon rate of 3 percent and Bond K has a coupon rate of 9 percent. Both bonds have 13 years to maturity, make semi annual payments, and have a YTM of 6 percent. If interest rates suddenly rise by 2 percent, what is the percentage price ..
Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $49, $200, and $112, respectively. If Baker undergoes a 3-for-2 stock split, what is the new divisor for the price-weighted index? (Do not round intermediate calculat..
The December 31, 2013, balance sheet of Schism, Inc., showed long-term debt of $1,400,000, $140,000 in the common stock account and $2,650,000 in the additional paid-in surplus account. What was the firm’s operating cash flow during 2014?
In the case Murphy Oil V Armstrong, Armstrong was the guarantor on a contract signed between Murphy Oil and Price Oil. Murphy provided oil in the amount of $259,585.75 to Price. Price did not pay this and filed bankruptcy. Determine how your business..
Deduce the differential equation for a derivative dependent on the prices of two nondividend-paying traded securities by forming a riskless portfolio consisting of the derivative and the two traded securities.
Which one of these would not be paid from free cash flow? What is the highest marginal rate at which corporate income is taxed? Who pays taxes on earnings distributed as dividends?
Ratios and Fixed Assets - The Le Bleu Company has a ratio of long-term “debt ratio” .35 and a current ratio of 1.25. Current liabilities are $950, sales are $5,780, profit margin is 9.4 percent, and ROE is 18.2 percent. What is the amount of the firm..
Which of the following is NOT a criticism of cost-benefit analysis?
Given the following data, calculate the cost of the company’s preferred stock, common stock, and bonds. Given the costs you’ve calculated for the company’s sources of financing, now calculate the company’s weighted average cost of capital (WACC),
Next year free cash flows for the AA company is expected to be $10 million. It is expected to grow for the following two years at 10% and then for 9% for the following year. You have determined that the EV/EBITDA for the firm in year 5 is expected to..
If Starbuck, Inc. just paid a dividend of $10.15 and you expect that dividends will grow by 8 percent, then 1.4 percent in the year after that, then stay flat at $25 for six years, and after that dividends grow at a 2 percent indefinitely, what would..
Bond J is a 6.2 percent coupon bond. Bond K is a 10.2 percent coupon bond. Both bonds have 20 years to maturity and have a YTM of 6.9 percent. a. If interest rates suddenly rise by 1 percent, what is the percentage price change of these bonds?
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